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tv   U.S. Senate  CSPAN  April 5, 2013 12:00pm-5:00pm EDT

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have to move out on the risk spectrum aggressively. and in fact that is what has been happening over the last few years. a lot of the systems have moved from the traditional to a long short strategies to private equity to generally alternative investments. and of course you do that with the risk increases. tenorio back -- did i go back? thank you. i must have hit -- yes. i'm finished. thank you. [applause] >> i think we have a few questions. one is why are the states so
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reluctant to have reduced their assumptions? >> what was that word you used? >> friggin, midwestern word. >> the reason is the higher the rate of return assumptions, the lower the required contributions and the states are weary to do it because it means they have to increase the funding, which means ultimately against the taxpayers will have to share some of the burden. so many of them are given early retirement to reduce the obligations, but that's the reason. the higher your assumed rate of return assumptions well worth the funding requirements.
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>> in addition to moving out on the risk spectrum, there are something happening with those conflict pension funds which is floating shares as a business as a revenue and i am just curious as to your opinion about that it seems to my view is did that create an opportunity and a kind of conflict in a way if they have a huge share loan operation which fuels a lot of shorting stocks in the portfolio i'm wondering what your view is on the sideline business that has become a mainstream business for a lot of these funds. >> the money managers have no control over that. the assets are with the custodian bank and the ultimate client pension fund can decide what guarantee is that it won't
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hamper the manager's ability to buy and sell securities in that portfolio. how they do it i'm not really sure. but they consider it kind of a risk list strategy of lending shares they get from return for lending those shares and they're confident that it is a safe moved to earn extra income for the fund. >> my question is how do you see this playing out? we covered the pension system in massachusetts quite that, and it's one of two things. it's either the states for the pension systems pay more for you see the change in an official benefits pushback and i ask this question in light of what is going on in california there's a
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lot of questions over whether that enables them to wipe away the contract with pension, so do you see this being worked out individually from the community to community or is there going to be a general sweeping change to the way the system works? >> since they are all independent i see it working out system by system, city by city, state by state, county by county across the country because it's all individualized, so i think the way they will approach it is by cutting employees, cutting the future obligations coming up with an assumption which means
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increasing. i didn't go into the studies that i looked at where some states 43 states i think have reduced the rate of return assumptions. a number of those states only did it for a limited period like five years. and then what are they going to do? i guess go back to 8.5 committee reduce it to 7.8? so there are a lot of twists and turns and i would encourage you to kind of look state-by-state, community by community to see how it is playing out. >> time for one more appear in the front. >> i am with the daily news in memphis. i was just wondering, you spoke about how a lot of 43 states have this 8 percent they have to move further on the risk
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specter. what is probably a more realistic rate of return? and then also are a lot of them hitting that rate of return? >> there is another study that shows over the past three, five, ten, 20, 40, and i do not have the number at my fingertips but i think over the last ten years or so, 15 it's been something like seven planned 8% realized and you can go back 20 or 30 years and it's been just slightly over 8% and i think that gives the ones that are 8% more courage but as i look out over the next several years i think the returns will be much lower than of the historical returns for the reasons tom talked about. inflation, risk premiums depending on asset class and if
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you are in a low inflation environment you are in a low interest-rate environment that means lower returns increasing as you go out on the risk spectrum so i think the 7.5 to seven is a more realistic and again you can do your own math and kind of blend the old 63 gove 40 domestic stocks, bonds you can see what they would turn out to be which is why many systems have come up with much more creative solutions. >> it's going to be like pulling wisdom teeth to get them to come down to 7%. >> thank you very much. it was great. [applause]
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thank you, david, everybody. we are going to be breaking for lunch right now in the ballroom sponsored today it will last until 1:00 p.m. and will resume in this room talking about student at. thank you. >> this is the number two of the spring conference focusing on issues facing the business community. when they return a panel
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discussion on student at as well as potential reforms such as relief from student loans and personal bankruptcy cases. that gets underway lives at one eastern. until then a discussion from yesterday's session with former white house budget director david stockman and former u.s. comptroller general david walker. he is the author of the new book entitled the great the formation the corruption of capitalism in america. we will show you as much of the remarks as we can until today's live coverage resumes at about one eastern. >> thank you for being here today. when we named this panel months ago we call the to the new austerity thinking that the nation would be in the midst of major discussions about
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austerity and probably a lot further along than we now see that we are. we knew we had a debt problem. the nation knows we have a debt problem. the question is what do we do we set and who feels the pain? we seem to be caught with who feels the pain. the public is adamant that we have to do something with it. i don't know about you i write about the ecoomy in the market. i get e-mails from people constantly screaming that we have to do something about the debt. some of these people are hoarding gold because they feel it is times coming but then you get to the question, the questions that you have seen in some of the polling. they have to do something about the debt but then you get down to the specifics like medicare, social security, people say no way to the door i talked to someone that was at a town hall
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about the debt and about what the government should do about it, and one very angry man who was retired stood up and he said you keep the government out of my medicare. [laughter] and so that's where we are. and you mix into this the fact that we are in a fragile times. the fact that over the last few years one and four people in their 20s and 30s lost jobs and they took pay cuts of 11 percent that they got to be hired or one in six people, 50 or over lost jobs and took pay cuts of 23% to get new jobs. people are hurting. they are still worried about their investment. they are still worried about retirement. half of people have saved $100,000 or less for retirement. so we are fragile and we are
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touchy about what to do in curing the debt yet we know we have to do it so to help us understand what we need to do and what the implications might be, we have a fabulous panel, people who know the nation's budget inside and out into the politics. first i would like to introduce david stockman. those of you that were around during the ronald reagan administration know his name while. he was the person that talked about the supply side economics or trickle-down. with time he became a little disenchanted with what happened with that and we will probably speak about that today. but they would have been a politician, a businessman, he
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was at solomons brothers and at one time he served as a u.s. representative in michigan. he was the director of the office of management and budget for 1981 to 1985. he's written three books. he has a fascinating read is the great deformation, the corruption of capitalism in america. and also with us today is david walker, a dennett person that knows washington inside and out and the budget process inside and out. now she is the founder and ceo of combatmerica, an initiative he is talking around the country about the debt problem and what needs to be done with it to get
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prior to this position, he was doing the same thing as the head of the peter peterson foundation david was the comptroller general of the u.s. and the head of the u.s. government accounting office that's the gao. for ten years, 1998 to 2008, and he served under three different presidents for a total of 15 years. his latest of three books is come back america, turning the country a around and restoring fiscal responsibility. please join me in welcoming our wonderful panel pitting [applause] david stockman. >> thank you. a moment ago they said that a lot of people are looking for an explanation, particularly journalists, of all that has happened since we had the crisis
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in 2008 and the massive stimulus programs, the big deficits and the controversy about house wall street and fixed or not is the same old game and so forth. i want to tell you i have the answer but it's a 700 page book called the great deformation. i will give you all the answers to when it started in 1940's during the 50's and so forth. i also have to confess i'm not a real author. according to some, i do grants and screens but i'm not a real author so i plead guilty to been politically incorrect and i going to have a debate with my friend here today on the budget because i do not think it is fixable but you ask how do you know you are politically incorrect and the answer is the professor told me so. he recently suggested a summary of my book that appeared the week in review in "the new york times" this weekend entitled
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sundown in america how the state hand is going to damage our economy with the work of a cranky old man. ..
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in other words, this is all bubbles. it's not real. we're not recovering. we're in the third one. it's going to go down like the last two and that if we don't wake up to the fact that all of this is artificial, as a result of really bad fiscal policy of a central bank that is out of control, a rogue central bank that's one of many doing the same thing around the world, we're going to have some pretty horrible things to deal with the morning after when it happens. now the book deals with many topics but i just want to hit two that are relevant to our discussion today. one of them i call, the fiscal doomsday machine and that's what i think about the budget. and the second i call, the serial bubble machine, which is what i think about the fed. the two are highly interactive. the point that i would make, and there's a lot of history
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that goes back into this in the book, is that when you get to the point where the central bank is so managed and manipulated, the entire financial market the entire financial system, money markets, debt markets, even stock markets and all-risk asset markets, then none of the prices in the financial market mean anything. they are not price discovery in the old free market sense of supply and demand, discounting the future, cash flows, what is your contract say. none of that is been crushed destroyed and killed by a central bank that is printing money so rapidly that puts so many puts under the market, the greenspan put, you know the bernanke, put, all the rest. what the markets are doing today, the markets are a work of a huge casino of players essentially front
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running the fed, every word, nuance, smoke signal that comes out of statements month to month and in between. pricing through arbitrage trades that free overnight money, that they're pumping into the system of rate of 85 billion a day. none of this is sustainable. yes. all would have been considered absolute loony, kooky stuff as recent as 1988. we're so caught up to trying desperately to keep the bubble alive we've allowed a group of people who run the fed. the politburo, running the u.s. economy. every aspect of the financial markets the whole world, all other central banks are doing the same thing. it's a race to the bottom to see who can destroy their financial system currency faster. last night japan weighed in
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truly insane stuff. they will double the monetary base within t years. not do i mention this, not only does it impose, or imfly -- imply great hazard for the economy going forward, not only suggests that a market is at a level this moment as we speak, is exactly 1% different than where it was 4750 days ago. in other words, in march, 2000, we have been here three times now. the bubble has been inflatedded dot-com bubble of the '90s, that crash. people lost 5 trillion dollars in 401(k) accounts and rest of eat. greenspan panicked, jumped in, pushed interest rate almost instantly down to 1%. began it inflate the next bubble, the housing bubble. millions of innocent americans got sucked into that in deeper than they could really afford to be on mortgages. we ended up with a subprime
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disaster really funded by wall street which was funded by the cheap money the fed made available to so-called investment banks from lehman to bear stearns and goldman and all the rest of them. and that bubble then got inflated so the s&p 500 was back to today's point in october 2007. and then the great crash came and 7 trillion was wiped out. and then what do we do? we have bernanke back with the greatest bubble machine in history immediately, telling the people, get back into the market. it is okay. right my bubble again. you can trust me. i find this crazy. in the six weeks after lehman went down, and it should have gone down. it was a house of speculation. after it went down, and in six weeks, the fed printed more money, that is, expanded its balance sheet, in seven weeks, excuse me. excuse i cheated on him a little bit, seven weeks, more than it had done in the first 94 years.
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in other words the balance sheet of eve of lehman filing was 900 billion. seven weeks later it was 1.8 billion, trillion. i mean it was 900 billion. 1.8 trillion. 13 weeks later it was 2.3 trillion. now it is 3.and going up at 85 a month and there is nothing in history that says this makes any sense whatsoever. none of this massive printing and bond-buying has gone into the real economy, main street. it is basically circulated internally within the canyons of wall street. it ended up back as excess reserves. excuse me. excess reserves on the, at the federal reserve. and, what it does, is basically keep the carry trade alive and well. by the carry trade i mean you buy a billion dollars worth of government 10-year bond at 1.8% today. a paltry yield that makes no
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sense. no invest in his right mind will buy a 10-year bond at 1.8 when inflation is two and he might have to pay taxes too. oh besides that there might be some risk if they call it a treasury. why are they buying it hand over fist. they're front runting the fed. the fed said we'll keep the price of this bond up. he can count on it. we're price keeping. we're putting a floor under it. on the other hand the minute they buy that bond a billion worth, they go across the street one second and put it up as collateral on a repo. borrow $980 million at 10 basis points to fund the billion they just bought that will yield 1.8, 180 basis points. capture the spread. laugh all the way to the bank. and sleep like a baby at night because uncle ben said i'm going to keep the funding rate that you're paying the overnight rate, at 10 basis points for the
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next two or three years. so you don't have to worry about that and i'm not going to let the bond fall. now the point that i'm making is, this is the closest thing to legal thievery that's been created in a long time and it leads to a totally artificial market in which the treasury yield is simply being created by a fed that is way beyond the end of its skies, that painted itself into a corner and that dares not stop buying bond because if it does then the yields might start going up, the price of the bond will fall even a little bit, the fast money and the carry trade will unwind it immediately because the spread is what they're living on. if the price of the bond falls, on leverage of 98%, the arbitrage is destroyed, they will lose money and they will unwind that trade and sell that bond faster than it can even be recorded
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by the computers. so therefore we're all hostage. we're in this massive bond bubble and we have the brilliant keynesian professors telling you, don't worry about the debt. don't worry about the deficit. washington will get around to doing what it needs to because the bond vigilantees are not even complaining. they love this. they love the red ink. they're registering total satisfaction because the bond yield on the 10-year is only 1.8%. well that is complete disinagain just nonsense. the reason the bond yield is 1.8% is because the fed is setting it there. the reason the bond vigilantees are laughing all the way to the bank, the spread trade, the arbitrage that i talked about. if the fed ever stops the whole thing will blow and then the fiscal problem will be a nightmare none of you in this room can believe because we will be at 20 trillion of debt before we know it and when interest rates normal mallize, 2% is the weighted average yield on the federal carry costs
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of debt today. if it goes to 4, 5, or 6%, that is 4, 5, 600 billion more that has to be financed of red ink and the politicians in washington can't even come up with 100 billion. so when you look at it in that perspective the great enabler of the pure of what's going on in washington on the fiscal failure is the federal reserve, the rogue central bank, the politburo of 12 monetary planners who are off the deep end in monetary policy that has never been tested in human history and can't possibly survive. so therefore, i say, let's look at a realistic look where the debt is, the deficit is, and it's not 7 trillion over the next 10 years. it is not in a glide path down like cbo says. that is just a rosy scenario, take two forecast and i know something about rosy
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scenario because i did the first one. i'll tell you, if you do an honest view of the bumpy future we have in store or even just a cut and paste job on the last 10 years, in other words, take the last 10 years and use it as a your forecast going forward, you will get 15 to 20 trillion of debt, of new deficit, a total national debt of 30 trillion. you will get 150% debt-to-gdp ratio. and you will get an utterly paralyzed congress because when you're facing numbers that big, anything they're talking about today, like the chain cpi, it saves $200 billion over 10 years is 1%. or 2% of the sizes of the real problem. so therefore they will have in ability to form a political consensus. i don't care what kind of miracles you expect from statesmen and the two political parties. it's over. it can't be done. this is a fiscal dooms day machine and it will hit the wall, i would say in the
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next few years. and don't expect anything to stop it. that is my point of view. thank you. >> thanks, dave. [applause] the well i agree we have an unsustainable fiscal policy. i agree with have an unsustainable monetary policy but i don't believe it's too late. let me if i can talk briefly about where we've been, where we are, where we're headed, how we compare to others and where we need to go. the truth is the united states is strayed from the principles and values that mate great under which it was founded. and that we face a range of key sustainability challenges that threaten our future position in the world, our future standard of living at home and future domestic tranquilty in our streets. 100 years ago the federal government was 2% of the economy. this year it is 23%, headed to 37% by 2040, absent a
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change in course. 100 years ago the federal government controlled 97% of spending. now it only controls bp 34% and declining. three things happened in 1913 that fundamentally changed the united states. it caused the federal government to grow and expand and it undercut states rights. number one, the being income tax. number two the federal reserve and number three the direct election of senators, rather than being appointed by state legislators. those three things as well as the tendency of the supreme court to legislate rather than just interpret laws, have really expanded the federal government's reach. if you look at at the numbers, it is tough to follow trillions. well let me give you an idea. last year, take off the zeroes. if the u.s. government was a household, it earned $24,000. it spent $35,000.
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it charged the $11,000 short fall to the credit card which is now $167,000. and if you add its unfunded obligations for social security and medicare, civilian military pensions, retiree health care, a few other things, its real obligations are $720,000. so, that is on a $23,000 a year salary. those numbers don't work. if you use honest and comparable accounting, which i believe in. i'm a member about of the accounting hall of fame and a cpa. the fact is, as you have to add federal state and local government debt in order to compare us to other industrialized nations for example, europe. there is only one country that has higher debt-to-gdp than we do, major country in europe and that's greece and we don't want follow their example. now we have more time but not a limited time. we have more time because we're the largest economy on earth. we're the temporary sole
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superpower. we have over 60% of the world's global reserve currency and we're the best looking horse in the glue factory butter we'll still in the glue factory. we have to recognize the reality that you can't spend a trillion dollars or more than you are taking in, charge it to the credit card, self-dealing in your own debt. that is exactly what is going on. the federal reserve is self dealing our own debt. we don't know what real interest rates are right now. they're manipulating interest rates. the carry trade is exactly part of this bubble situation that is going on. when you borrow at 10 basis points and buy something that is going to end up yielding you at least 1.8, that's a pretty big spread with no risk. and with a fair degree of certainty. that he is one of the reasons why we also don't have a lot of lending going on right now. you don't need to take any risk and make 170 basis points by doing absolutely nothing. and when the government ended up, quote, unquote, bailing out the financial institutions it did not add appropriate conditions and
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safeguards. it hasn't made the kinds of reforms that it needs to do. once the institutions quote, qoun quote, bay the government back with very low interest rates i might add, the government has no more leverage on them anymore. so what do we need to do? first, we have to recognize that we're going to solve this fiscal problem. the only question is, will we solve it prudently, preemptively before we have a decks crisis? that would be a dramatic increase in interest rates. everyone percent increase in interest rates, to 165 billion in interest for which you get nothing. right now we're about 400 basis points at least below the historical average. that is a lot of nothing. so are we going to solve it, prudently, preemptively, phased in overtime changes or will we wait till have a crisis at our door step in that happens, there will be a global depression. we can avoid that here is my frustration.
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nobody talked to more americans around the country i have, all 50 states, college campus, editorial boards, business community leaders, et cetera. the people are way ahead of the politicians. they are concerned about the deficits and debt. and when you see these other polls, well, don't touch my social security, don't touch medicare, don't raise my taxes. that is because those polls are grossly misleading. when you have a problem of the magnitude that we have you need to build a burning platform. you need to help people understand how serious the problem is and if we don't solve the problem, that it threatens our future position in the world, our future standard of living at home, future dough messtic tranquilty in your streets. you have to help them understand we're mortgaging future of our kids and grandkids at record rates while reducing investments in their future at a time they will face a lot tougher competition and increasingly interconnected global marketplace. that is irresponsible, it is unethical, it is immoral, it
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must stop. you must paint the burning platform. after you paint the burning platform then people are willing to do things otherwise they weren't willing to do previously. what do you expect people to say when you ask them, do you want to pie higher taxes? would you like to work longer before you're eligible for social security? what if we give you a less of a subsidy for medicare? what if you have to pay more of your own health care costs? what do you expect people to say? everybody would like to have their cake and eat it too. it just doesn't work. bottom line, we can solve the problem, and tell you why we get into q and a. the 10,000 mile fiscal responsibility bus tour in september and october. 27 states. stopped in 16 states plus d.c. had two very special town hall events where we recruit ad demographically representative group of voters in ohio and virginia. they spent half a day with us. alice rivlin did one with me. we built the burning platform. they got it.
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then we exposed them to a range of illustrative reforms. budget controls, social security, medicare, medicaid, health care, defense, taxes, management reforms and political reforms. and yes, we need political reforms. here's what we got back. 97% said of a representative group of voters, 97% said, putting our finances in order should be a top priority of the president and congress. only 8% had confidence that meaningful progress would be made this year. i hope they're wrong but so far they're looking right. 85% said it was going to take a combination of spending reductions and additional revenues weighted towards spending reductions two to three to one spending reductions and mandatory is where the spending is you have to deal with. 92% agreed on a set of six principles and values to be able to guide a grand bargain which we came up with. 92% and then we had a minimum of 77% up it 90% support for specific reforms dealing with those eight areas that i talked to you
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about. so what's the problem? the problem is the biggest deficit this country has especially in this town is a leadership deficit. we have laggardship, not leadership. our political system is a republic that is not representative of or responsive to the public because of gerrymandering, because of the impact of wing nuts on the right and the left on the primaries with very low turnout. because of campaign finance reform. because the lack of term limits. and so we're going to have to diffuse this ticking debt bomb. the federal reserve will have to change its policies. its new line of base is called the bailout business. but one of the reasons it is in that business is because the president and the congress have failed to work together to deal with this issue and because the president and the congress decades ago changed the fed's mission to require it to be concerned with short-term unemployment, which poe lit oilsed the fed. -- politicized the fed. when we get a grand bargain
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and end up implementing this in phases over time, then the fed needs to change course and we need to get rid of the fed being concerned with short-term unemployment. that is not its job. thank you very much. [applause] >> a lot of agreement there, especially i think i hear both of them saying maybe one our biggest deficits a leadership deficit. i think total agreement there. before, i want you to ask your questions but before we move onto that i'm just dying to ask david stockman a question related to, looking back. we'll move onto the debt. but in his book, he mentions that he never thought we were in any danger of a great depression when we had that major bailout. he was supposedly from going into a great depression during the financial crisis and before we move on, david, i just have to hear what you are thinking of that?
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>> okay. this is really important because all of the craziness that went on in september 2008 was based on the theory of great depression 2.0, which i called the economic equivalent of wmd. it never happened. it didn't exist. it wasn't a real possibility. most economists never would have expected that but the one great alleged scholar of the great depression who has his analysis of the great depression totally wrong because xeroxed it from milton friedman who was totally wrong about what the fed did in 1930 and 1931 happened to be chairman of the fed. so he happened to panic. and he happened to go around in the circles, high circles of government, muttering great depression 2.0. we can't make the mistake the fed made in 1931, which wasn't a mistake that they made and therefore, they didn't have to avoid it but this guy thought it was. pretty soon you have hank paul son running around who tempermentally has five minute attention span.
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highly unstable and emotional. he fans the flames of, you know, this is true. this is really what happened. and it is not something make up. read his own memoirs you will see. read too big to fail and all the other histories. pretty toon the two of them create ad panic in the beltway that led to the stupid thing called tarp in marching congress up the hill instantly for 700 billion without even reading the legislation, what kind of nonsense is that? they're are great heroes of david and mind who had been working in the vineyards of fiscal restraint and responsibility for 20 years, pete domenici, people like that, who in a flash had everything they had done in their whole life wiped out by the panicked reaction of paulson. you think i'm on paulson's case for a good reason? yes, i think i am. in any event there wasn't a great depression 2.0 in store. i'll tell you why. it happened in 1930 because
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we got through the great war and everybody was broke in the world. during the 1920s the u.s. loaned a lot of money to the rest of the world to buy our exports. we were the china of the 1920s when the stock market crashed, the bond market, the foreign loans, which were equivalent of the junk bonds of today, all went from 100 cents on the dollar to 10 cents. all the foreign borrowers defaulted. they had no cash to buy u.s. exports. our export machine shut down almost instantly. we were a bigger exporter and creditor than china was today. as a result of the export machine faltering, capital spending dropped 82% in less than a year and a half. inventories were liquidated massively because our export market was dry. capital spending stopped. and that had nothing to do with the fed. it was not a lack of money supply. that is, i think a totally erroneous heretical historical argument. do we weren't anything like
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that. hoover vils were in the interior of china when the great crash occurred in fall of 2008. we were a massive importer debtor. we didn't have much of an industrial economy left. there wasn't going to be a big liquidation of industrial inventories, industrial activities, and industrial jobs. we had a one-time shift due to the housing collapse in terms of employment and economic activity. it lasted about nine months. it was a deep recession but it wasn't, you know, depression 2.0. we went down two or 3%, not 30 or 35% like the great depression. and all of this crazy stimulus, all of this wall street bailout in the money pumping was against a phantom problem. and it was a cover story so that the goldmanites running the treasury, could bail out goldman sachs and morgan stanley that should have gone down for the count just like all of the rest of
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them. because this was not going to spread to the rest of the economy for the reasons i've explained. the main street banks were solvent. they didn't have all this toxic junk on their balance sheets. the run on the bank was entirely in the wholesale money market and canyons of wall street on the so-called investment banks with you were really hedge fund. it would have burned out there. they should have let it happen. i'll tell you what, the world would have no worse off or better off with or without goldman because it was have been reorganized. 10 new firms would have risen up out of the talent there except they would have been run by 10 groups of chastened men or woman who just lost the entire value of their stock and now would not be engaging in the same imprudent, reckless, speculative activity again today that they were doing in 2008 but that didn't happen. they were rescued. their stock is now back to $124 or 150 whatever it is today. it should have been zero.
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no lessons were earned learned. no discipline was imposed and as a result of that, we have 12 people running the u.s. economy, crushing savers, telling people we had the president of the fed yesterday in boston saying, yes, we are trying to drive savers into high-risk investments. in other words, to put it in plain english, they're telling granny that she has to get out of her savings account which is making 40 basis points and she can't live on that anyway and get into a junk bond fund or buy the russell 2000 because the wise men who sit on the monetary politburo decided that the savers of america ought to be in the junk bond market helping to levitate the wealth effect and restart the economy. this is a whole nonsense theory. what we have is almost a coup d'etat in this country. being run undemocratically by unelected group of mandarins and elitists at
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the fed who are really getting us into big trouble. this isn't just a debate whether they're a little too easy or not easy enough. this is about a rogue institution that is going to take everything down. [applause] >> david walker. when i listen to david stockman talk, i wish we should just end this right now this is just disaster going nowhere. do you have a vision of, of what the timing and the sequencing could be, that could be productive, that could take us out of this without a great depression or some major economic disaster? >> dave is talking about monetary policy and the federal reserve and i share a lot of the concerns that he has there. let me talk about fiscal because as i said before, which is tax-and-spending. let me talk about that because as i said, right now the fed's the only game in town. they're trying to prop up the economy. they're trying to prop up the housing market. they're trying to prop up a lot of people including the
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u.s. government. and realistically they're going to probably continue to do what they're doing rightly or wrongly until there's a grand bargain. what is it going to take? look the truth is, if you look what's been done so far, they have been treating the symptoms, they haven't been treating the disease. for example, if you look at what happened at the end of the year, we raised taxes on people making over 400,000 a year, couples over 450. raised capital gains and dividend for people making over 200 or 250 added on a new rate on top. didn't transform the tax system at all. we have an abomination of a tax system. very few people can prepare their own taxes. for the record, i do, not because i'm a masochist but to show it can be done. the fact we need to dramatically streamline and simplify in our tax code in a lot of ways i'm happy to get into. secondly, what did they do with sequester? yeah, we need to cut defend spending and
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nondiscretionary spending not in a stupid across the board meat axe approach. what are they not drawing? they're not addressing medicare, medicaid, social security, you know, 1.1 trillion in tax preferences that represent back door spending that aren't in the budget, that aren't in the financial statements that aren't period i canly reviewed and reauthorized. they're not dealing with the drivers of our structural problem which are mandatory spending and our outdated tax system. yes, health care is the fastest growing program costs but the biggest risk to the budget is interest cost. on interest you get nothing, shine ol' la whatever you pay for interest paying for past since. i believe what needs to happen we need to reach a grand bargain that focuses on balancing the budget. we're not balancing the budget. the way the government calculates the a balanced budget is a bad joke anyway. what we need to focus on something more difficult to
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manipulate, debt-to-gdp. after world war ii we had over 100% of debt-to-gdp. we took it down to 30, about the time you came in. we didn't pay off a dime of debt between 1945 and 1980. we had fiscal discipline for the most part. we grew the economy with growth policies. it came down. we lost our way. we regained sanity for a period of time. since 2003, and that is the year in my view things spun out of control, things have been out of control. so we have to focus on not paying off debt, not balancing the budget. getting debt-to-gdp down. we need to actually recapture control of the budget. you can't have two third of the budget on autopilot and growing. in my opinion, the only two things that shouldn't have an annual limit, one that you can't have an annual limit on and that is interest. you have to pay what the market says. when you have a real market. and other is, i think we can reform social security to make it solvent, sustainable, secure, more savings
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oriented. we know the demographics. we know the numbers. and therefore you don't technically have to have a budget for that. but everything else you have to have a budget including health care. we're the only major industrialized nation that doesn't have a budget for health care. nobody else is stupid enough to do that. not even countries that have socialized medicine. we need to capture control of the budget. need to spend more on investment and young people on things that work. less on seniors an consumption. we need to phase in a lot of changes dealing with social security, and medicare, over time. but that's okay. we can get the miracle of compounding working for us. you got to talk about who is eligible for what when, at what subsidy. you need to reform the tax system to make it simpler, fairer, more competitive, more equitable and generate more revenues. and i'm happy to get into details if you want and they're not doing any of that. so basically what they're doing is, they're claiming that they're doing a lot when in reality they're doing virtually nothing.
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here, let's look at this, what is today? april fifth? what is it? the president was supposed to submit a budget the first monday in february. he still hasn't submitted a budget. leading from behind again. it's unbelievable. s. >> let's hear from you. what are your questions? go up to the mic. identify yourself and fire away. >> by the way i'm a political independent and have been since '97. i don't think either one of the parties are worth a damn. >> by the way i'm a defrocked republican for quite a while. >> yeah. >> david stockman goes after virtually every politician in every party in his book. >> hi. i'm mike harris from cnn money. i want to say first of all, that sunday was probably the nicest day of the year, easter sunday. i wake up, first thing i read, david stockman's piece
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and sort of ruined my day so thank you very much. but my question is, so i understand your point that we weren't really at risk of a great depression but give the experience we're seeing in europe which pursued a very different approach to the crisis than the united states did, my question is, how much short term pain is acceptable if you accept at all that adjustment process, even if we weren't at risk for a great depression there would have been a short term adjustment that inflicted perhaps higher unemployment, et cetera? >> that is good question. it goes to the issue of austerity. allegedly they're doing it we didn't, we're smarter. listen to the keynesian professors they will tell you that. i'm saying austerity is not an elective course. it's something that happens to you when you're broke. the reason they have gone to austerity in spain and italy and greece and the rest of the piigs are periphery, the
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bond market finally said we're not going to buy anymore of your paper at a rate other than one that goes higher and higher with each new issue. so they're into austerity in europe because their welfare state since have finally caught up with them and it is spreading to the rest of the continent. it has not stopped yet. it is going to france right now. france is a disaster. it is a basket case. auto sales are collapsing. retail activity is collapsing. unemployment in france is above 12% and their economy is next in line. pretty soon germany will be the only solvent nation standing and their miracle because they have been exporting to all the rest of the countries in the ec who won't broke buying their goods. that whole civil isn't going to work. so therefore when you ask the question, i say that by way of preface, what would have happened here, yes, we would have austerity but it was something that we would have to go through anyway, and you think the sooner that we go through the cure,
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the better off we're going to be. i do not think that, i have two points that i think are important. one is, everything that the fed did had nothing to do with the unemployment rate being 11.1% or 10.7 or anything else. none of the money the fed created ever went into main street for the next nine to 20 months after the crisis occurred in october 2008. it simply stayed in the canyons of wall street, circulated back to the excess reserves on balance sheet of the fed, kept the money market rate at zero, and rekind diled basically the fast money belief that the fed has got to put back in the bernanke super put and that's the only thing that happened. a recovery on in on wall street, none of this money went into main street. you know why? because main street is so loaded with debt from the last 30 or 40 years households didn't need to
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bore he are, shouldn't have borrowed. most of them didn't want to borrow and banks didn't want to lend because there were very few solvent borrowers left. business is the same way. the business actually is not as flush as they say. it has 12 trillion of debt sitting on it, corporation, and unincorporated businesses compared to 3.5 trillion in 1994 when greenspan started this whole thing. so, the idea that the easy money was going to elicit credit growth, it was going to restart the economy basically didn't work, couldn't have worked because the economy was overloaded with debt and to begin, in the beginning. therefore it was totally a pointless exercise. the fiscal stimulus helped some people but most of it was a waste. only 30 billion of the 800 went to means tested programs where it should have gone, food stamps, earned income tax credit, and other programs to help people who pass a means
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test. so my point is when the crisis comes, you bowler is it the-- bolster the safety net. you put money into helping the desperately poor or people who are thrown in the street or who lose their job or who have no other way of making a living, but you don't put the money into green energy boondoggles so some elon musk character can try to create electric vehicles that he sells for $100,000 with a half billion dollars of taxpayer money when there are so many damn car companies in the world we don't need elon musk, you know, telling us that he will start another car company and sell us electric vehicles that don't make a lot of sense for $100,000, toys for rich people anyway. so what i am saying is, we could have not done half of what they did in the stimulus. we could have put the money in the safety net which is the one and only thing the government ought to do as we
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work through this austerity and begin it get our house in order fiscally. let the private economy heal. shut down these mad men at the fed. let washington focus on the dollars and cents of its revenue and spending accounts. bolster the safety net, put the money that we have to spend there, and got out of all the rest of it. get out of the bailout business. and means test social security so we can cut the costs of that dramatically and use it to help people that are actually in need. >> questions back here. >> hi, anna lynn with cnn money. obviously you're not a fan of the fed and you don't believe they're helping the job market. under your ideal scenario what would the job market look like in this country? what would be the normal unemployment rate and should public policy either fiscal or monetariwise have any role?
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>> okay. i will answer that quick. it should have no role. the unemployment rate should be what falls out of the free enterprise system. if it is not manipulated or deformed or distorted by government intervention. if the unemployment rate is 6% or 4% or two%, that is the result. you say, oh, isn't that terrible. what about people that need jobs? the answer is, if we allowed the marketplace to set the price of labor and we got rid of things like the minimum wage, then there would be a job for anybody that wants it. because at the right wage there will be a job, even in the united states. what we need to do if we want to help people, and be humanitarians, is uply meant what they can earn at $7 an hour, if that is what the job with earned income tax credit or transfer payments from the solvent and middle class taxpayers who have a obligation to help citizens who try to help themselves
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and still pass a means test and are not earning enough. i'll tell you what. if we got rid of the minimum wage, if we bolstered the earned income tax credit, if we told the government, it is none of your damn business where the unemployment rate is. you can't even measure it anyway, stop mucking around. if we told the fed, forget it, this mandate is ridiculous. humphrey hawkins and let private enterprise work, the country would be a lot better off. i don't know where the frictional rate of unemployment really is but we would get real growth, real jobs, real prosperity and there is not a chance that will ever happen. >> let me jump in just for a second because, i don't think the fed should be in the business of being concerned with unemployment. that is not its job. it should be trying to make sure we have reasonable long-term interest rates, fight inflation, try to protect the value of the dollar. that is its job, all right? i do think the country ought to be concerned with the unemployment rate but i also think this is another example of where we're
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treating the symptoms and not the disease. first the way the government keeps score, unemployment is lot higher than they're telling you. underemployment is lot higher than they're telling you because how the math works how they keep it. secondly, you know, when you spend 2 1/2 times per person, what other countries spend on k-12 education and health care, and you get below average societal results you got a problem. and the reason that we have in many cases high unemployment is because we can't compete on wages. we have it compete on innovation, quality, productivity, value added et cetera. yet our education system, our my graduation policy, how we're investing with regard to r&d is not conducive to what our comparative advantage is. we have not moved to new parato recognize we're not 50% of the global economy, we're 22 and losing market share. we need to recognize the new
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reality and deal with some of the structural problems that are contributing to unemployment that we have. >> can i just add to what dave said? i think the reason i, i'm so militant about the unemployment rate not being policy is because it's now a standard, it is the excuse for every loophole in the tax code. it's the excuse for almost any spending program you can think of. everyone of those items becomes a jobs program and therefore, that's why we have the disgrace that dave talked about before, the irs. that's why you can't get rid of almost anything in this huge federal establishment that we have today. all of it is going to lead to short-term loss of jobs. that's why we're buying innings at that for crying out loud in a world where we have no enemy, military tanks. why are we doing that? because it's a jobs program. i'm saying if the federal government was out of the unemployment managing
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business, and out of the jobs business, then the congressman could get back to looking at fiscal accounts and seeing what makes sense for the long run, where we get the revenues, where we cut the spending, how we bring it closer to balance. as long as we have unemployment as the excuse, the crony capitalists of america and lobbyists of k street the pacs of every shape and dimension will be like barney kels on the doomsday machine i talked about. you will not get spending rates and spending cuts and all of it is happening in the name of keeping the unemployment rate slightly lower than the missed measured one reported every month by the bls. . .
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now is in vertical free-fall and the various zeroth political support for the safety net of any time i remember back then. what do you think the public reaction to that perception but have then and more importantly how would that have affected what happened in the economy?
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>> i feel you were directing the question to me so i will answer. >> actually i would like you both to address the the >> there were three down and to to go. the investment banks were not investment banks they were hedge funds that were well over -- >> [inaudible] >> but i am going to answer that after bear stearns went down i didn't see anybody panicking particularly. lehman brothers went down and merrill lynch was already finished and the targeted over to bank of america. goldman could have gone down. i know people who think wall street is the greatest thing since sliced bread. goldman could have gone down but the bank of europe wouldn't have gone down. the of socialist governments. the banks in germany would have bailed out. the french would have bailed out
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gnp and the rest of them. there wasn't going to be a confederation. they bring good shape. wells fargo wasn't going down. if they had to take citibank down, the fdic could have handled it better. i know we have people that are the sophisticated people that have watched this for a long time that say this could happen. -- this is a panel from yesterday's session on the society of business editors and writers. this is day two of the panel on student loan debt. it is just starting out. >> -- at george washington university. many of you probably know but those of you that don't know actually one of the top centers for financial the education of the country happens to be located here it's the global center for financial literacy. the doctor is here in the red is the head of the center and who is in our book probably the top researcher an academic expert on personal finance issues in the
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country. so, if you call us and we say we are going to get back to you it's because we are taking the time to call anna and find out what the answers are so congratulations for doing this here at the george washington university. today's panel is something that we are very interested in, the whole idea of student debt has gotten great press over the last year just because of the magnitude but we also think that there are some very critical underlining questions hopefully the panel will be able to get that today. issues like what is the difficulty in finding jobs, or the affecting graduating students? the issue of for-profit schools and how that has skewed the numbers and possibly the biggest single issue that we are concerned about is not the student to graduates the $27,000 in debt but the student who doesn't graduate and still has the debt. so some very significant media issues to talk about, and luckily you have an outstanding panel here to do it.
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and our moderator is kathy, well known to all of you as an author, columnist and past president of sabew. it's your show. [applause] >> on organized this panel because i felt very strongly that we as journalists and as parents were involved in america's children. we told them that college is an investment, don't worry about going into debt. we told them you can go to any school that you want and we will make it work. you're major is going to have a big impact on whether you can read pay your debt. we didn't tell them that there are different types of student debt and to be fair, we didn't know. daniloff case is the reason we econ our children as because the
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whole student at issue has changed so much in the past 20 years, but we as parents have one experienced of our children and it is completely different. so, i got together a panel of people who can talk about really all aspects of still in debt and how the debt is different. one of the things, actually i'm going to stop because i was talking to becky and she said okay there's so much to say. she said they are not here to listen to you. [laughter] it's like okay we have a program. we know who all these people are. it's very impressive. we want them to talk so i will make it very quick. jay and is not only an expert on student loans, on colleges, she is also a parent and has experience in this herself. i have got pauline abernathy too
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chollet pauline and stephen burd are experts on a broad array of the differences in the types of debt that your repayment options, and also with the incredible number of legislative efforts that are being made in consumer protection efforts that are being made in the stood in that arena right now because the debt is truly unique. and actually among the most toxic forms of that we can get our kids into. so, without further ado, i am going to introduce you to james clark who is going to come up and just so you know the program speakers are going to come up and speak of the podium for a few minutes and then sit down and hopefully answer your questions. >> so, as kathy said, i've been covering college financial aid. we also have the rankings that
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we've been doing. we've been focusing on the values and on the net price, and we focus on the average debt for about a dozen years. we also tried to explore the decision making process that parents go through as their kids are applying for college and choosing a college, and i have kind of conclude it as a parent and other financial reporters that the admissions process as well as the financial aid process really encourages parents to make an emotional decision about borrowing and here are some of the reasons why first of all families come as kathy mengin, put together their college list based on academics and they are kind of aspiration of lists. maybe i can get into the school
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to read this focus on the reach schools and they don't really focus on the financial aspect. they start with the aspect and they put that list together from that point of view and the colleges actually encourage them to just wait to see what you get especially when it comes to merit. you aren't going to know what kind of merit your kid would get to the i can tell you i've done this i have three kids all through college, so you get to the point your kids are getting these letters. my own kid has been jumping around saying my gosh i got into the school i can't believe it i'm going to the school and i'm thinking to myself yes and the other school is the one that we can actually afford. so it's like i guess we are going to send her to this school
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so then we are just primed for the next decision which is hell am i going to do this. what happens what letters convey the idea that they are doing you a big saver that they are actually presenting you with this financial aid for iraq that is largely loans. we are inviting you to take out a loan and i can tell you that this has happened to me because my daughter -- we get the financial a letter, and it congratulated us telling us that we have the opportunity to take out 100 percent loans. we were going to take out a loan, and on top of whatever and subsidized stafford loan that we were entitled to to begin with. so, at the very misleading situation and very emotional
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situation here you are your kid has gotten into the school of his or her dreams, you want to make that kid happy. you are excited, so there you go. they are easy to get you can get a stafford loan a pretty much with no underwriting, no nothing. and they've gotten a little harder to get, but basically pretty easy to get. parents are ultimately signing up for these things and the kids are, too. people have a responsibility to think about it. you need to start when you are putting the kawlija list to get there. and then you have to think about it again. you have to talk to your kids and say what can we really do wish we don't get the aid? so i think that there is a level of responsibility for the family, too that you can't blame
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it all on the college families get set up for this but they do play a role in this decision making process. >> my plan with my children is i told them don't study that hard in school if you get into a junior college that would be great. [laughter] >> all of you parents and tiger moms, you are going to pay for that. >> so, thank you for inviting me to speak here with the institute for kawlija access and success we are based in oakland california and have a small here in d.c.. all of the things you just heard are absolutely true and one question that i get often from many of you is how could this be that the letters don't
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distinguish between loans and grants and how could it be that we expect people to apply before they know how much aid they will be eligible for. how could it be that we don't explain the difference between the federal and private loan? and the answer is when i went to college and many of you and to call that it was an entirely different world. the loans barely exist. college did cost much less. you could actually put yourself through college working during the. on summers. the world has changed in college was not as essential as it was today for everyone. so, we have got a dramatically different world today, and our policies and practices have not changed. we have the same policies in place with fewer people went to college, college costs much less. the financial such a mission was very different. so, we are in the process of major catch up of changing our policies and practices to actually reflect the new world.
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succumb just a little bit of context he will no doubt heard we have more than a trillion dollars of student loan debt, outstanding as more than car loans or credit card debt as with. students are indeed barring more. when i meant to kawlija majority of the students graduated with a bachelor's degree from the nonprofit or public college didn't borrow. two-thirds of them borrow an average of $27,000. again that this federal and private loan debt. you hear a lot about students who are borrowing $100,000 dredging from college with 100,000. those really are the out lawyers. there is less than 1% of the graduates that borrow that much the average again is 27,000, a one-third on anything in student loans. but you do see more and more and later this year there will be
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new federal data on federal loan borrowing which will be a major development but the latest data that we have is still in many cases for 2007 to 2008 and what that showed at that time, those students were highly concentrated in the for-profit college sector to be a majority of the students that graduate from the for-profit colleges have both federal and private loan debt on the public and the private sector. what we say often it's not how much you borrow, it's how often and if you complete to the point you're of devotee to repays much greater if you have completed a school and of what people don't realize is their chance of borrowing and completing various dramatically based on what school they go to putative aires by sector, non-profit and for
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profit, that even within those sectors there are huge variations in terms of what the cost actually will be, but your likelihood of barring anything coming your likelihood of barring private loans coming and likelihood of completing. and so, we need to be providing much better information to the families up front so they can make better decisions about where they apply and where they enroll. right now in fact some of the key data that you would expect in order to make those decisions is simply not available. it's not just that it is available to the experts, you know, in a hard to find a place come a lot of it is just simply not available. so what do i mean by that? the federal government does not collect the average debt at a graduation by college to is, we at ticas every year put out an annual report on student at for the class of the most recent one was 2011 to come out with 2012 later this year. we use a private data set that we buy access to that college is
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voluntarily participate in to come out with that data and the school based data, but it should actually be required to be reported and collected and made available. as a result because it is voluntary the for-profit colleges virtually none of them are participating giving essentially that is a study of non-profit and public colleges and only those that choose to purchase of eight and each year sometimes we highlight those that are high debt colleges they disappear in the next year they are not on the list they don't report. saddam that is basic data. the administration has put out a college scorecard that has on it completion rates and that information which is a step forward to say here is one page that has basic information about this college. but the completion rates are not for all students. they are only for the first time full-time college students, which in a lot of colleges particularly community colleges that is a very small percentage
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of their students. so, it isn't a real graduation rate. it can be very deceptive. likewise, the data on that score card is the median debt of those who enter the payment so it is the median debt of those who graduate and those who dropped out, and it also doesn't tell you what percentage of the students actually borrowed. so, again it's not the information that most families want and need to make good decisions about where to apply. but it is a huge step forward. i have diluted now a couple times to private loans versus federal loans. the terms are set by this federal governments to they have fixed interest rates. they have a whole host of consumer protections and an array of flexible repayment plans including income based repayment which allows you to repaid as a share of your income so that your payments will always be manageable today and after 20 or 25 years you have
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not repaid in full the balance is forgiven. there is a discharge of the debt if you become disabled. there is a host of protections none of which are guaranteed in the private loan world. private loans are literally their riskiest way to pay for college. it is like paying for college with a credit card. they are usually variable. there are some fixed now they're typically not capped. you have very little payment protection or options, and they are not -- they are considered not to discharge a ball. they are very difficult to discharge on like the credit card debt or even gambling of which are treated. that is one of the issues that we in the large question and there is legislation pending to change that treatment of private loans to say they should be treated just like other forms of consumer debt, not like alimony or criminal fines.
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so again it's not how much you borrow but whether you are borrowing federal loans for private loans. in terms of what can be done, so very briefly and then i will turn over for questions. we have a whole agenda to produce the burden of student debt on the website. so i will just talk about a range of a few key issues that can be done to address those. one is the federal student loan policy. so as many of you know the interest rate on subsidized federal loans is scheduled to double again july 1st from 3.4% today to 6.8% to read from our perspective it makes no sense at the time of record low interest rates to be charging 6.8% on federal student loans. but that is exactly what will happen if congress does not act that they will automatically
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double. there is also the issue of the doubling that will make it more likely that we will see students turning to private loans when they could have borrowed a federal loan because they will say federal loans have a 6.8% interest rate, this private loan, are they saying it starts as low as 2%? and won't appreciate the difference between a variable rate and fixed rate and the differences in the types of loans so we already see at the height of the private phone market in 07 and 08 half of the private loan borrowers could have borrowed more. so you can imagine what we would see today if we suddenly thought all of the federal loans at 6.8% and private loans being advertised aggressively as low as meaning if you have perfect records that will be your interest rate today but it is going to go up each month as interest rates rise, and if your credit record or your parents
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credit record because the private loans require a cosigner come if their credit isn't perfect then it isn't going to be that low even today and will only rise over time. so it is addressing the federal student loan and it is making sure that the borrowers know about income based prepayments. we have got rising student loan default rates in this economy, and people -- many of them could have avoided the default if they were aware of the income based repayment which only became available in 2009. so we need to see a lot more outreach to let people know that the payment is there and available to them. we also need better loan counseling that front. so that when students media decision about how much to borrow they understand what that is going to mean to them in terms of monthly payments and if this is their first year and they are going to be in school for four years that means four times that amount and really helping them through that.
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the department of education for their credit did just release a new loan counseling tool with an online repayment calculator that is long overdue and is a set in the right direction of helping borrowers make better informed decisions, and specifically during the counseling that is required when they are leaving school, it allows the borrower is to act as part of a conference to take a repayment plan so they can literally see what the monthly payment will be, with the total payment will be under each plan and then pick one leave and apply online. savitt is again another important way of helping them pick the right plan for them and get into it rather than desalting into a very expensive and a high monthly payment plan which is the current policy. i've already talked about the need for better consumer information and we have the price calculators that helped people to get a sense of what is the real price to them and not the sticker price which, you know, very few people pay the sticker price. so every college now has a net price calculator.
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there is a college scorecard we've already talked about the administration put forward a model of ward letter they are calling the shopping sheet and more than 500 colleges that enroll more than 10% of students have agreed to use them for the first time this year and it would distinguish between loans and grants and it made clear what is the net price that eps after gransta you have to either rm or c.a. for more of. that is not the case with most award letters today. there's a bipartisan legislation pending in congress the would require all colleges to use that kind of a standard award letter so families that have an easier time comparing the offers. it's not easy even for someone like myself to get the letters currently and actually to determine which is a lower cost, which because of the way the information is presented. two other private loans i talked
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briefly changing the bankruptcy treatment the also need to be requiring that all private loans be certified by the school's first to ensure the student is actually qualify for that price of loan and to ensure that the school canceled a student you are taking out a 5,000-dollar private loan did you know you get to a federal loan that has these consumer protections? some schools do that voluntarily right now. but it's not required that the check with the school and it's not required that this will tell the student how much the remaining federal loan is available that they have and so that is something that also there is legislation pending. it's something that the consumer financial protection bureau could just when forward to require as well, which we have been advocating before. equally important for the millions of private loan borrowers who have private loans today, many of them with interest rates in the double digits and really they are saying we hear from borrowers the consumer financial
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protection bureau saying i'm willing to pay $100 a month but a 1500. i don't even make $500 a month and they can't get any relief from their lender or any flexibility to get the loan isn't discharge of all in bankruptcy. one of the things that is also attending next week is the deadline for commenting on a request for input from the consumer financial protection bureau on suggestions for how could we develop a way to make private loans payments more affordable? what kind of loan modification system, what other types of relief would help address what they have seen the complaints that the of received and then the data they are showing where we see lots of people are going to not be able to buy a home cannot participate as long as they have got that kind of manageable private loan debt hanging on over their head. and then finally come to end of the last item that is critical for reducing the burden of
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stewed in debt is funding pell grants. pell grants our need based. it's the largest program that the federal government has and even after the recent increases in the maximum pell grant, it covers a smaller share of the cost than it has since the program started. it's less than a third and a used to be well over, have well over two-thirds and i can talk a little bit about why that is. but we need to be investing in pell grants. it is the key to reducing the need to borrow particularly for low-income students and pell grant recipients are actually twice as likely to borrow today as dimond pell grant recipients and the recipients that graduate from a four year program, nine out of ten of them have stood in that so they are much more likely to borrow and in fact they also graduate with $3,500 more than the average non-pell grant recipe and so we are
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already expecting the lowest income to take on more debt and that will only get worse unless we are able to invest in the pell grants going forward to the estimate by one to actually have you sit down out there and you too because after the speech we are going to go to questions and i don't want to take this extra time getting situated. >> i hope everyone is doing well. javan scared me a little bit because i'm trying to figure out how much debt that is going to be and about 15 years from now is very frightening and if i have to tell them i'm already telling them that montgomery college i was in montgomery college and maryland is the way to go. so, my name is stephen berger and we are a policy think tank in washington. before coming to new america i
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was a reporter at the chronicle of higher education for a 15 years. i started covering student loans in 1995 and the changes that has occurred over that period of time largest amazing. at that point very few undergraduates for taking out private student loans in fact i never thought about covering them at that point because you just didn't hear about them to the and so it was a surprise even to me when about ten years later you started hearing these stories about undergraduates with these loans and how aggressive the lenders were marketing than. so i want to talk a little bit from the student's perspective but i want to start off by saying the federal government has subsidized loans to college students for nearly 50 years. when the government's loan program, the stafford loan
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program first began, it was intended mainly for the middle-income students to help them to afford to go to the college of their choice. as late as the early 1990's, less than half of all bachelor degree recipients were taking out student loans. today two-thirds do and has said with an average debt of about $27,000 per borrower. overall, students and parents borrow an estimated $112 billion a year through the various federal loan programs. in addition they are borrowing nearly $10 billion a year in a risky private loans which are almost always more expensive and less consumer friendly than federal loans to the student loans have long been considered a good investment providing individuals with the means to obtain an education that would pay dividends come at a substantial dividends throughout their lifetimes but it's increasingly clear that many students are finding themselves
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on manageable levels of debt such as getting married, buy a house, having children and retiring. if you want to get a sense of the significant toll the student loan policies have had you have to look at some of the comments that financially distressed borrowers submitted to the financial protection bureau recently. i was looking at their site the other day and i came upon one borrower that has a very substantial debt rhode. even in the end of my generate from working two jobs and my wife working one job we cannot afford many things because the amount we must pay each month for the student loan companies. we cannot afford health coverage which in turn limits the ability to start a family. as we both will turn 30 this year we feel that time is running out for us to be able to reach our goals and dreams. another bar who pays for $1,600 a month on his federal and private loans wrote i will never own a home because of this
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crippling debt that i faced since i graduated college. i can't even buy a car because i can't qualify for a car loan to me by july of a 2000 honda civic that will die on me some day and i have no idea what i will do. do they make mistakes? certainly come and they readily admit it, but what kind of system requires teenagers at the right age of 18 to make financial decisions that could have such a life altering the fact, such a life altering the fact? has another borrower wrote coming out of high school i didn't realize by taking on this much debt could affect me as much financially to the i just wanted to get away from home and get an education. students and their families are generally left on their own to navigate complex student loan system and offers a variety of choices each with a different interest rates and loan limits. yet the education department requires colleges to provide insurance counseling to students
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but it often comes too late in the process after the of already committed to taking out the loans but finding their promissory notes and is often perfunctory. the first weeks of college can be overwhelming and the last thing that many students want to do is focus on the details of the student aid packages. a federal student loan borrowers also face a baffling array of repayment options. the government offers financially distressed borrowers various ways to stay out of default such as for parents, determinism and income based repayment. but these choices all have their own rules and regulations and require the borrowers to take steps to enroll and stay in them. unfortunately many of them simply don't receive the kind counseling the need. to understand the choices that are available to them or what they need to do to get a vantage of them. once the students leave college they are truly on their own to sort these things out. as a result, many of them on necessarily fall behind on their payments and in that desalting.
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the consequences are sevier ranging from the ballooning repayments to the ruined credit ratings and a loss of professional licenses. federal policy makers have been deeply committed much more difficult for them to discharge student loans and bankruptcy than any other form of consumer debt and have removed any statute of limitation on the collections of the loans allowing the government to literally unleashed an army of student loan collection agencies to pursue them to the grave to it is also empowered the government to garnish the wages of the be sold without a court order and sees tax refunds now federal benefits such as the portions of social security payments from the elderly and disabled borrowers. it's certainly unacceptable for students to take out federal loans without having any intention of paying them back. the reality however is that many if not most people who default on loans do so because they simply can't or don't have the money to repay them. they are not looking for a free
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ride. yet our system for student loan collections doesn't recognize the crucial distinction the borrowers should deliberately set out on their loans and those that are too financially distressed to repay them are subject to the same treatment. many of the marland as a result. so, what can we do what are the steps that we can actually take. pauline really has some great ideas and i would definitely recommend that you go to their web site. one of the areas that some ideas about the better loan counseling they have really impressed me and i definitely suggest that. we believe that there america foundation there should be a single loan program for undergraduates with the same terms and conditions for all and that income these repayments should be the the paltry payment
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option for students meaning that students would automatically be enrolled in the program which would allow them to pay back their loans as a percentage of their income after they graduate. such a system would recognize some people simply don't earn enough to fully repay their loans no matter how earnestly they try to. as i said, loan counseling needs to be strengthened, and congress needs to make private loans this chargeable when bankruptcy like all other forms of consumer debt. only then will private loan providers have an incentive to work with financially distressed borrowers to ease their burdens through loan modifications and refinancing the options that are generally not available today. i'm going to stop there and i look forward to your questions to be >> before we get to the question and answer i just as a couple of questions for the audience. how many people are here because you have children that have debt and you just want -- how many people here are looking for a way to cover student loans and
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college and all that stuff? i want to throw a couple of ideas at you because there are so many things that i think could help us raise the bar on how we cover college. one of them is every one of you have local colleges in your neighborhood and you can find out just exactly how good they are at graduating class in six years which has a huge impact on how much you pay for college, how much debt the kids come out with at the end of school and whether the graduate kids at all. some of the private colleges if you go to the college navigator site, collegenavigat.gov all of the data is. it is online and if you want to do a comparison of all the colleges in your little area it would be the most incredibly mind-boggling thing to your
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parents because he would suddenly see look, this college that my son wants to go to the discharge and $40,000 a year they graduate 10% of their students. if you are one of the 90% who don't graduate and you borrow for the education, your chance of being financially devastated for the rest of your life is huge to beat you also -- there are step-by-step tutorial that i think we could do a much better job of dealing with just on what do you do when you graduate? five tips for paying off your student loans. but again, i think some of it is just all in your local neighborhoods. look at your individual colleges. go in and compare what the administrators are making versus what they are charging the college. compare how much they give to the students. compare their award letters.
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hold their feet to the fire because in fact, we have been too easy on schools. we have acted as if they are giving our kids something so valuable, and actually we acted like they are a commodity to be a we don't do a great job of comparing one school to the next day and the differences between schools are actually life altering. so, with that i am going to go to questions. come up to the microphone. >> i am karen miller of pennsylvania. my question is why do you think colleges don't make a greater effort to reduce their price? has anyone tried to itemize exactly what goes into the cost of college, and why wouldn't they want to meet their product more affordable? >> i'm going to say they don't
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have to but go ahead. there's a microphone right there faugh for. i have two different answers to that. one mainly affects private colleges i would say but also we're basically it just lowering the prices makes you look bad in the market. you don't want to look like you are a discount, that you are discounting the education that you provide. so there's a great pressure to keep up with the competition and to continually look more which is just strange. but in the other aspect for colleges is a lot of schools really don't have a choice or the traces, but the states have just been cutting the amount of money that they provide the schools so the easiest way to
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deal with the cuts is to raise prices. >> i do think that there is an issue of -- there is a backwards way of approaching it because colleges do have to give out a lot of financial aid and oftentimes tuition discounts in order to fill the seeds. but then that means they have to raise tuition to cover the people that are not getting the aid. it's just kind of a vicious cycle and that sure many people don't pay the sticker price, but somebody has to pay the high price and the whole issue of enrollment management is such that colleges work very hard to grasp exactly how much you will be willing to pay to come to their college and they will give you just enough to get you in the door but not necessarily as
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much as you can afford to pay so it's just this very kind of situational type of financial model. >> think of them as auto dealers. you walk into the show room, the size you up how much will this person pay that is what they are doing to you and if you go in and your kid is set on georgetown, not speaking from experience you are just going to find a way to let them go to georgetown in the state figure they don't have to give you the aid to get you in then they won't give you the aid to get you in. the other thing, too when you were telling your kids to apply to all of the reach colleges, the top of the list is less likely to give them any sort of aid. it's the colleges that they totally fit into their profile that are more likely to get them aid and is eager to accomplish that is a little under their,
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you know, their status for their grades those colleges are going to give them a lot of aid. where do we tell them to go? top of the list. so we are part of the problem. >> it is a very good one and that for more than 50 years we have had those stickers sheets and window seats that have been required by federal law. we are only now the dating doing that for colleges with these standardized letters but that's how far behind we are but it's exactly the same idea of allowing, helping the consumers make an informed decision. really want to underscore steve's point that what's driving the cost and why you don't see a lot of reductions in price although we are seeing more. you are seeing many more colleges saying they are freezing to mission and lowering their tuition, but the key -- it really varies by sector.
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for-profit sector set their prices very differently than public colleges driven by the appropriations and the withdrawal of the state appropriation nonprofit colleges yet again in different factors and depending on their lowest different factors go into account and how they set their prices but also want to underscore the point that everybody needs to be looking at the net price, not the sticker price. the college with the highest sticker price will often be the most affordable particularly for low-income students. you know, they are going to go to harvard he can get in they are going to go for free and they agreed to get more aid than they would in a local college that might be public or non-profit and have a much lower sticker price. so we need to get people to understand that it is the net price and not the sticker price you need to look beyond and there are some tools to help people do that. >> i am a student at the
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university of south carolina, and we have written about this with the student newspaper and one of the things we wrote about obviously the doubling of the student loans, federal loans have, but couple of different times and keeps getting pushed down the road. one of the things we noticed when we obviously want to try to source and get people on both sides of the argument and people are proponents of that thing aa, their argument is how else are we going to put our foot down on the colleges and if you make that loan rate to double that colleges are going to have to bring down their prices. it's going to really put their feet to the fire like you talking about. if it stays low, which i agree it needs to but if it stays low how else do you keep their feet to the fire. what else can you do to force them to do that? >> i think the interest rate
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doesn't actually do that for colleges to 80% of the students to take out the subsidized loans of 3.4% interest rate have subsidized loans as well so they are already paying 6.8% so they are already taking up the 3.4 and the 6.8% so it isn't for the impact. i think the only people who will benefit from student loan redoubling our the private lenders. >> i was wondering if any on the panel could address the fafsa and the parents obligation because when we did it and we did it in the spring of 08, which was very different than the fall of 08, we came up with a very different number, and the schools were recalcitrants in their negotiating ability of
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this number. we kept on scratching our heads because it was based on parents and come. the student had 1,000 or $2,000 worth of savings, found a part-time after-school job. it seems that the schools were expecting the families to go out on a limb based on an income level that would never be the students. >> the fafsa forms have changed radically since 2008 to the they are a little bit easier to negotiate right now, but one of the things that you should do is get the book paying for college without going broke because it actually takes you step by step through the forum, and there are a lot of mistakes parents make on the form because normal english is not how it's written and as if you read it or in
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particular if you skim through it because it's a massive and you don't want to read all 300 pages of your instructions, you are likely to make some very costly errors and the book will lead you through how to do that without making those costly errors but it is a little bit easier than it used to be. we are being told we need to wrap up so i'm going to have you go as fast as you can and we are going to try to answer as quickly as we can until they kick us out. >> my name is oliver and i am a small business with u.s. today to that i graduated from college last year and out of almost all of my friends i'm the only one who isn't working at brooders bagels or something. a lot of my friends are wondering what is this worth it? i don't know if when i made this
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decision that this was something i should have done when i was 17 or 18 and not to say that my parents should have made it for me that would have probably been even worse, but maybe i should have taken some time off, like done something else. nobody knows are there other options that help you make that decision better or do you have to make it when you are 17-years-old? >> fees are one of the things i think would be so great if we helped counsel parents in the newspaper and on tv if we gave them a little bit of emotional support for saying to your kids the junior colleges and such a bad option. taking two years to get your undergraduate down someplace you won't have any debt isn't a bad option but in my community there is a lot of mormon families and their kids go on a two-year mission and they come back so much more mature and ready to go to college and instead of
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sailing their freshman year, they actually study. then they don't have to take the call which causes. the number of kids to take five or six years to get through college is phenomenal and some of that is i think the majority of the student, how prepared they are for college but as parents and as journalists, we don't present but this is a really good option for kids. don't just go down this path because all of the parents in your neighborhood are talking about harvard and talking about princeton and all these places. don't be pushing your kid to go. sorry. >> i would just add to that the researcher is very clear that unemployment rates for those that don't go to college is more than twice as high as those that have a college degree. so it is a much better investment.
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but people need to be much -- look at where the go to college. do they go and take six years or can they get it done faster because that is going to significantly have less debt and what are they studying? i think about those things more carefully. >> i would also like to add one of the things you want to think about whether it is worth it is how much did you are of to get the degree? i mean if you borrowed may be 10,000, 5,000, maybe it is worth at the end of the day. but if you borrowed 40 or $50,000, then i would say yes it is probably not worth it. some schools particularly in community colleges there are students who probably would be better off if they were taking out a loan than trying to work two jobs while going to school because their chances of completing are so low if they try to dewitt without borrowing anything at all and if they took out the loan to prepare their car so they have a better chance
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of completing, then that would be a good investment. >> he's telling me that he's going to save in the balancers if we don't get off the stage but i would like to suggest they will stick around for a little while and can answer questions one on one. they are incredible resources. so if you cover this topic or if you want to cover this topic, come out and get their contact information. thank you very much. [applause] >> there are no breaks scheduled at this point. there will be a schedule on the case. in the amphitheater there will be in session on covering private companies and both will begin as soon as we can make change. thank you for your attention.
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[inaudible conversations] [inaudible conversations] [inaudible conversations] >> a break here and we will be back for more live coverage of the conference at 3:15 on the panel on tax reform. here on c-span2 tonight in prime time we will feature on booktv in that interview with senator tom coburn of oklahoma prieta
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all of us here in the colorado basin or watershed, we are talking about somewhere between 35 to 40 million people now in
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the united states and mexico as well. they all depend, we all depend on the colorado river basic source and we need it for everything for municipal use to drink. we need it for our houses and of industry. we need it for mining and most importantly in the biggest water around here is true agriculture. we can't grow anything without it. it is considered to be the most litigated river in the world. and that is probably very accurate. murf lawsuits created to regulate what is collectively known as the law of the river if read terribly 13 to 15 major laws that have stand of the whole 20 get century until the present time that talks about who gets so much of the water and who can take at and how to share at and the relationship with mexico and the water as
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well. >> it's important to remember a central banker is limited to be the central banker can't control everything that goes on in the economy. it's important they do shape the course of economies and of the world. that said come at the end of the day they do have a finite powers they can use. when you boil it down the have a dial and we can put more money into the economy or less. it's a lot more complicated than that. as you and i know, they can regulate banks, they can enforce banks and other ways, but to think that everything that has gone wrong is their fault is grown to think that everything that has gone right is, you
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know, felt when greenspan got to much credit for the growth we had in 2,000's. it's easy to know to blame alan greenspan and the federal reserve for the crisis what we see now is overseeing things as well. >> another look at the society of american business editors and writers conference we are taking a break from our live coverage and we will go back here at 3:15 for a discussion on changing the current tax system. yesterday's federal reserve spoke on day one of the conference about the recent monetary policies and how they've contributed to improvements in the economy. this discussion is just over an
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hour. [inaudible conversations] >> good afternoon. my name is randy smith on the journalism at the university of missouri, and also a past president of sabew in '92 and '93. over the last 40 years of my career, i can't imagine a worse time as far as covering what happened in the economy in 2007, 2008. i was in the industry at that time to buy don't think that we saw things go any further south as fast as we did at that time. to put some of that in perspective, and also put to look ahead a little bit, we are very lucky today to have to
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greet guests with us. janet, the vice chair of the board of governors of the federal reserve, and al allan sloan all of astana senior editor at "fortune magazine" and also a seventh time winner of the globe award. janet has a long and distinguished career which is in your program, but quickly shoos president and ceo of the federal reserve of san francisco before the current post chair of the white house council of economic advisers under president clinton, and she's also been a professor at the university of california at berkeley to get i'm going to turn it over here to allan to read our time is short to make a few remarks and then we will hear from janet. thank you very much. >> thank you, randy. when you say the two distinguished guests i look around thinking there has to be
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someone else up here. there is one aspect of janet biography that isn't in here and it turns out she and i are both from rockland, new york -- brooklyn to york and it turns out -- [applause] >> yes. it turns out we both had speech therapy for accents. ..
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california but it hasn't made a difference. well, thank you for inviting me here, and for offering me what i consider a perfect opportunity to speak on the topic at the heart of the federal reserve's efforts to promote a stronger economy, the vital role and growing use of communication in monetary policy. i know some of you cover the federal reserve and are familiar with how it sets monetary policy through the federal open market committee. you know that the fomc pays very close attention to what it says in the statements it issues after each meeting. this communication is supplemented by chairman bernanke's post meeting press coverage is and by providing detailed members of the
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committee's meetings. getting this message out to the public depends a good deal on the work you do in reporting on the fomc, analyzing its statements and actions, and explaining its role and objectives. so i want to begin by thanking you for those contributions. but let me also say why and particularly please to speak to you today. as writers and editors, all of you are prodigious consumers and producers of communication. at first glance, the fomc's communications may not seem so different from what you've heard from other government agencies say about their policies or businesses, what they say about their product. i hope to show though how communication plays a distinct and special role in monetary policy. i would like to offer a
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comparison that may highlight that difference. suppose instead of monetary policy we were talking about an example of transportation policy, widening a road to ease traffic congestion. whether this road project is announced at a televised press conference or in a low-key press release, or even if there's no announcement, the project is more or less the same. the benefit to drivers will come after the road is wide and, and it won't be affected by whether drivers knew about the project years in advance. at the heart everything i will be explained today is the fact that monetary policy is different. the effects of monetary policy depend critically on the public getting the message about what policy will do months or years in the future.
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to develop this idea, i will take you on a tour of past fomc communication, the present, and what i foresee for the future. until fairly recently, most central banks actively avoided communicating about monetary policy. montagu norman, governor of the bank of england in the early 20th century, repeatedly live by the motto, never explain, never excuse. that approach was still firmly in place at the federal reserve when i went to work there as a staff economist in 1977. i'll begin by discussing how a growing understanding of the importance of transparency shaped fomc communicate she in the years before the financial crisis. next, our relate have a
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financial crisis brought unprecedented challenges for monetary policy that required the use of unconventional policy tools, including some that were barely contemplated before the crisis. communication was a centerpiece of these efforts. finally, i'll look ahead. i am encouraged by recent signs the economy is proving and healing from the trauma of the crisis, and i expect that at some point the fomc will return to a more normal approach to monetary policy. at the conclusion of my remarks, i'll discuss the communication challenges the fomc will face when it comes time to make that transition. fomc communication has long been a topic of great interest to me. and it's one i work on more directly since 2010 when chairman bernanke asked me to
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lead a new fomc subcommittee on communications. recently, i used the word revolution to describe the change from never explain, to the current embrace of transparency in the fomc's communication. that might sound surprise to an audience that knows very well what it feels like to be in the middle of the communication revolution. discreethis breed and frequencyt communication, it seems, never stops growing. and i will admit the fomc's changes to the pace and form of its communication seem pretty modest in comparison. then i've mentioned the chairman's quarterly post meeting press conferences, which were initiated two years ago. while these events are televised and streamed live, the mode for
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most of the fomc communication is decidedly old school. is the printed word. in the committee's most-watched piece of communication is the written statement issued after each of its meetings, which are held roughly every six weeks. it may seem quaint that my colleagues and i continue to spend many hours laboring over the few hundred words in this statement, which are then extensively analyzed only minutes after their release. the revolution in the fomc's communication isn't about technology or speed. it's a revolution in our understanding of how communication can influence the effectiveness of politics. think it will help if i start with some basics. the fomc consists of the seven members of the federal reserve board in washington and five of
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the 12 presidents of the regional federal reserve banks. all 12 presidents participate in the fomc, but only five get a vote. that is a roster that changes each year. the fomc's job, which is assigned by congress, is to use monetary policy to promote maximum employment and stable prices. these objectives together are known as the federal reserve's dual mandate. in normal times the committee pursue these goals by influencing the level of a short-term interest rate called the federal funds rate. that's what banks charge each other for overnight loans. when the fomc pushes the federal funds rate up or down, other short-term interest rates normally move in tandem. medium and longer term interest
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rates, including auto loan rates and mortgage rates, those generally adjust also through a mechanism i will return to in a minute. by pushing the federal funds rate up or down, the fomc seeks to influence a wide range of interest rates that matter to households and businesses. typically, the fomc acts to lower the federal funds rate with the intention of reducing interest rates more generally when the economy is weakening or inflation is declining below the committee's longer run objective. the fomc raises the federal funds rate when inflation threatens to rise above its objective, or when economic activity appears likely to rise above sustainable levels. racing and learned that federal fund rate was along the primary means by which the fomc pursued its economic objectives.
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now, it's hard to imagine now, but only two decades ago the federal reserve and other central banks provided the public with very little information about such monetary policy moves. the speed of never explain, nevenever explain wasvery much . there were a number of different justifications for that approach. one view was that last disclosure would reduce the risk and tamp down suspicions that some people could take advantage of disclosures more readily than others. some people believed that markets would overreact to details about monetary policy decisions. and there was a widespread belief that communicating about the fomc my back in the future could limit the committee's discussion to change policy in response to future developments.
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so in sum, the conventional wisdom among central bankers was that transparency was of very little benefit for monetary policy and, in some cases, could cause problems that would make policy less effective. while communication and transparency steadily increased elsewhere in government and society, change came slowly to the fomc. actually, it wasn't until february 1994 that the committee issued a post meeting statement disclosing that there been a change in monetary policy. even then, it only alerted the public that the committee had changed its policy stance, and it offered scant explanation. something big was changing though, and it would soon be the force driving major enhancements in the fomc's communication.
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by the early 1990s, a growing body of research challenged widespread assumptions about how central banks, such as the federal reserve, affected the economy. that reevaluation starts with a question that puzzles many of my students when i was a professor. how is it that the federal reserve managed to move a vast economy just by raising or lowering the interest rate on overnight loans by a quarter of a percentage point? the question arises because significant spending decisions, expanding a business, buying a house, or choosing how much to spend on consumer goods over a year, those decisions depend on expectations of income, employment, and other economic conditions over the longer-term, as well as longer-term interest
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rates. the crucial insight of that research was that what happens to the federal funds rate today, or over the six weeks until the next fomc meeting, is relatively unimportant. what is important is the public's expectation of how the fomc will use the federal funds rate to influence economic conditions over the next few years. for this reason the federal reserve's ability to influence economic conditions today depends critically on its ability to shape expectations of the future, specifically by helping the public understand how it intends to conduct policy over time, and what the likely implications of those actions will be for economic conditions. to return to the example i used
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earlier, contrast this effect on expectations with that of a road project. today's commute, alas, will not be improved or changed at all by the news that a road will be widened one day. but the effects of today's monetary policy actions are largely due to the effect that they have on expectations about how policy will be set over the medium term. let me further illustrate this with some history. starting in the mid 1960s, the federal reserve didn't act forcefully in the face of rising inflation. and the public grew less certain of the central bank's commitment to fighting inflation. this uncertainty let expectations of future inflation to become unanchored, and more likely to react to economic
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developments. in 1973, an oil price shock led to a large increase in overall inflation. expectations of higher inflation in the future affected the public's behavior. workers demanded raises, and businesses set prices and otherwise acted in anticipation of higher costs. and all that helped fuel actual inflation. the fomc's occasional efforts to reduce inflation in the 1970s were ineffective, partly due to the expectation that ultimately it just wouldn't do enough. by contrast, most of you probably know about the federal reserve's successful inflation fighting in the early 1980s. the fomc raised the federal funds rate very high, causing a deep recession. but also convincing the public
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that it was committed to low and stable inflation. anchoring inflation expectations at low levels helped ensure that jumps in commodity prices or other supply shocks would not generate persistent inflation problems. and this was edited by the effect of another escalation in oil prices that started in 2005. unlike the 1970s, these price shocks did not result in a broad and lasting increase in overall inflation. that's because the public believe the federal reserve would keep inflation in check. the fomc actually wasn't forced to raise interest rates, which softened the blow of higher fuel costs on households and businesses, and it wasn't necessary to do so because the credibility of the federal
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reserve had built since the 1980s. if the public's expectations have always been important, you might wonder how monetary policy had any effect prior to the transparency revolution. as it turns out, with the notable exception of the late 1960s and '70s, the fomc usually responded in a systematic way to economic conditions. in 1993, the economist john taylor documented that fomc policy changes since the mid '80s had a fairly reliably followed a simple rule based on inflation and output. changes in the federal funds rate were usually made in several small steps over a number of months. in practice, the federal reserve's approach was never
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explain, but behave predictably. a close analysis of the fomc's past behavior is a good guide to future policy, but it had to shortcomings as a substitute for transparency. first, it gave an advantage to sophisticated players who studied the fomc's behavior. something that is arguably inappropriate for a government institution. and, second, while the policy rule such as the one developed by john taylor explained the course of the federal funds rate much of the time, there were cases when it didn't end when even the experts failed to correctly anticipate the fomc's actions. the trend toward greater transparency accelerated during the early 2000s. starting in 2000, the fomc
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issued information after every meeting about its economic outlook. had also provided an assessment of the balance of risks to the economy and whether it was leaning towards increasing or decreasing the federal funds rate in the future. such information about intentions and expect nations -- expectations for the future, which is known as forward guidance, became crucial in 2003. when the committee was faced with a stubbornly weak recovery from the 2001 recession. it had cut the federal funds rate to the very low level of 1%, but unemployment remained elevated, and the fomc sought some for the way this to make the economy. in this situation, it told the public that it intended to keep
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the federal funds rate low for longer than minded than expected by adding to its statement the words, in these circumstances, the committee believes that policy accommodation can be maintained for a considerable period. so let's just pause your and note what this moment represented. to the very first time, the committee was using communication, mere words, as its primary monetary policy tool. until then it was probably come to think of communication about future policy as something that supplemented the setting of the federal funds rate. but in this case communication was an independent, and i believe effective tool for influencing the economy. the fomc had journeyed from
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never explain, to a point where sometimes the explanation is the politics. by the eve of the recent financial crisis, it was established that the fomc could not simply rely on its record of systematic behavior as a substitute for giving occasion, especially under unusual circumstances for which history had little to teach. i think we're all fortunate that policymakers had learned this lesson, because the fomc was about to encounter unprecedented economic conditions and policy challenges. the financial crisis and its aftermath demanded advances in fomc communication as great as any that had come before. the situation in 2008 and 2009 was like nothing the federal reserve had faced since the
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1930s. in late 2008, the fomc cut the federal funds rate nearly to zero, essential to as low as it could go where it has remained. with its traditional tool for expansionary monetary policy, namely lowering the federal funds rate, off the table, the fomc turned the unconventional and, in some cases, newly invented policy options to try both to help stabilize the financial system and to arrest the plunge in economic activity. the public had grown accustomed to monetary policy that focus on changes to the federal funds rate target, with occasional, and at this point pretty limited, guidance that a particular policy stands would probably last for a while.
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beyond the task of describing the new policies, extensive new communication was needed to justify these unconventional policy actions, and to convincingly connect them to the federal reserve's employment and inflation objectives. the best known of these unconventional policies is large-scale asset purchases, what's commonly known as quantitative easing. starting in late 2008 and continuing through today, the federal reserve has purchased longer-term government agency debt securities, agency guaranteed mortgage-backed securities, and longer-term treasury securities that have been totaled added about $2.5 trillion to our assets. these purchases were intended to come and ugly path, succeeded in significantly lowering longer-term interest rates and
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raising asset prices to help further the federal reserve's economic objectives. this is an easing of monetary policy, also known as accommodation, beyond what is provided just by maintaining the federal funds rate close to zero. but it's important to emphasize that the effects of asset purchases also depend on expectations. if the fomc buys, say, $10 million in longer-term securities today but is expected to sell them tomorrow or very shortly, there will be little effect on the economy. current research suggests that the effects of asset purchases today depends on expectations of the total value of securities the fomc intends to buy and on
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expectations of how long the fomc intends to hold those securities. to make these asset purchases as effective as possible in adding accommodation, the fomc, therefore, needs to communicate the intended path of the federal reserve's security holdings years into the future. and i'm going to return in a moment to current and possible future ways in which the fomc does and my communicate this information. the other unconventional policy designed to contribute monetary easing was almost purely communication. it is enhanced forward guidance about how long the committee expects to maintain the federal funds rate near zero. the situation in our 2009 was similar to 2003, but yet the more challenging.
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because in that earlier episode, the fomc at least retain some option of a further reduction in the federal funds rate target. in 2009, communication about the future path of the federal funds rate was the only option. well, initially, forward guidance was simple and familiar. the fomc statement noted that quote, economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. the committee enhanced its forward guidance in august 2011, when it substituted, at least through mid-2013, for the words, an extended period. this date was moved into the future several times, most recently last september when it
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was shifted to mid-2015. this calendar guidance was an advance over the indefinite extended period, but it suffered from an important limitation. the date failed to provide the public with a clear understanding of what conditions the fomc was trying to achieve, or the economic conditions that would warrant a continuation of the policy. the consequences was hard for the public to tell whether a change in the calendar date reflected a shift in policy or just a change in the committee's economic forecast. to help provide greater clarity about the committee's objectives, and january 2012, the fomc adopted and released a statement of its longer run goals and monetary policy
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strategy. the statement laid out for the very first time the rates of inflation and unemployment that the fomc considers consistent with the dual mandate. specifically, it stated that the longer run inflation goal most consistent with the fomc's price stability mandate is 2%. and that the central tendency of fomc participants estimates of the longer run gnome or rate of unemployment ranges from 5.2-6%. as the statement also made clear, economic development may cause inflation and unemployment to temporally move away from those objectives, and the committee will use a balanced approach to return both of them, over time, to the longer-run goals. on the one hand, for example, the current rate of
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unemployment, at 7.7%, is far above the 5.2-6% range in the statement, and it's expected to decline only gradually. inflation, on the other hand, has been running at or below 2% and is expected to remain at similar levels for several years. in this circumstance, both legs of the dual mandate call for a highly accommodative monetary policy. with unemployment so far from its longer run normal level, i believe progress on reducing unemployment should take center stage for the fomc, even if maintaining that progress might result in inflation slightly and temporarily exceeding 2%. the committee reaffirmed the statement in january 2013, and i expect it to remain a valuable
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roadmap for many years to come, indicating how monetary policy will respond to changes in economic conditions. meanwhile, the fomc is continue to enhance its communicate about how it would use the federal funds rate to return inflation and unemployment to its longer run objectives. last december the committee replaced its calendar guidance for the federal funds rate with quantitative measures of economic conditions that would warrant continuing that rate at its current very low level. specifically, the committee said it anticipates that exceptionally low levels for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6.5%, inflation between one and two years ahead is projected to be no more than
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half a percentage point above the committees 2% longer-run goals, and longer-term inflation expectations continue to be well anchored. i considered these thresholds for possible action a major improvement in forward guidance. they provide much more information than before about the conditions that are likely to prevail when the fomc sides to raise the federal funds rate. as for the date at which tightening of monetary policy is likely to occur, market participants, armed with this new information about the committees reaction function, can form their own judgment and alter their expectations on timing as new information accrues. these thresholds will come as a
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consequence, allow private-sector expectations of the federal funds rate to fulfill an important automatic stabilizer function for the economy. if the recovery turns out to be stronger than expected, the public should anticipate that one or both of these thresholds values will be crossed sooner, and, hence, that the federal funds rate could be raised earlier. conversely, if the outlook for the economy unexpectedly worsens, the public should expect a later dust off in rates -- left off in rates, an expectation that would reduce longer-term interest rates and thereby provide more accommodating financial conditions. the threshold guidance for the federal funds rate looks ahead to a time when the economy is healed from the worst effects of the financial crisis. getting back to more normal economic conditions will allow for a more normal approach to
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monetary policy. i look forward to the day when we can put away our unconventional tools and return to it now seems like the relatively straightforward challenge of setting the federal funds rate. at some point it will be appropriate to seize adding to accommodation and later to begin the process of withdrawing a significant accommodation required by the extraordinary conditions caused by the financial crisis. and i believe that, once again, in munich issue will play a central role in managing this transition. let me start with our current program of asset purchases, which was lost -- launched in september 2012 and revised in december. notably, the fomc is described in this program in terms of a monthly pace of purchases rather
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than as a total amount of expected purchases. the committee has indicated that it will continue purchases until the outlook for the labor market has improved substantially in the context of price stability. in its most recent statement, the fomc also indicated that the pace and composition of the purchases may be adjusted based on the likely efficacy and costs of these purchases, as well is the extent of progress toward the federal reserves economic objectives. in my view, adjusting the pace of asset purchases in response to the evolution of the outlook for the labor market would provide the public with information regarding the committees intentions, and should reduce the risk of misunderstanding and market
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disruption as the conclusion of the program draws closer. the federal reserves ongoing asset purchases continually add to the accommodation that the federal reserve is providing to help strengthen the economy. and ended to those purchases means that the fomc has ceased augmenting that support, not that it is withdrawing accommodation. when and how to begin to actually removing the significant accommodation provided by our large holdings of longer-term securities is a separate matter. and in its march statement, the fomc who reaffirmed its expectations that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the current asset purchase program ends, and the economic
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recovery has strengthened. that means that there will likely be a substantial period after asset purchases conclude, but before the fomc starts removing accommodation by reducing asset holdings or raising the federal funds rate. to guide expectations turning the practice of normalizing the size and composition of our balance sheets, at our june 2011 meeting, the fomc laid out what it called exit principles. in these principles, the fomc indicated that asset sales would likely follow liftoff of the federal fund rate. it also noticed that in order to minimize the risk of market disruption, the pace of at said sales during this process could be adjusted up or down in
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response to changes either in the economic outlook or financial conditions. for example, changes in the pace or timing of asset sales could be worded by concerns over market functioning or excessive volatility in bond markets. while the normalization of the federal research portfolio is still well in the future, the fomc is committed to clear communication about the likely path of the balance sheet. there will come a time when the fomc begins the process of returning the federal funds rate to a more normal level. in their individual projections submitted to the march fomc meeting, 13 of the 19 fomc participants saw the first increase in the target for the federal funds rate as most likely to occur in 2015, and
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another expected that to occur in 2016. but, of course, the course of economy is uncertain, and the committee added the thresholds for unemployment and inflation, in part, to help guide the public if economic conditions or developments warrant liftoff sooner or later than expected. as the time of the first increase in the federal funds rate moves closer, in my view it will be increasingly important for the committee to clearly communicate about how the federal funds rate target will be adjusted. so, i hope i've been able today to convey the vital role that communication plays in the federal reserves efforts to to promote maximum employment and stable prices. communication became even more significant after the onset of
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the financial crisis when the fomc turned unconventional policy tools that relied heavily on communication. better times and a transition away from unconventional policies may make monetary policy less relied on communication. but i hope and i trust that the days of never explain, never excuse are gone for good, and that the federal reserve continues to reap the benefits of clearly explaining its actions to the public. i believe further improvements in the fomc's communication are possible, and i expect they will continue. so let me stop there and thank you. it's been my privilege to share these thoughts with you, and i very much appreciate the invitation to join you today. [applause]
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>> i would like to thank janet for two things. first, for showing up here and speaking in a language of approaching english, the closest i've ever heard from an open market committee person. and second, first thing you think print has a future. if you can demonstrate that as a business model, we will carry you out of here on our shoulders, and you won't have to worry about any government salary anymore. [laughter] spent a concern we all share. >> that's a common concern. now, something that i was not originally in our conversation, but if you look at the papers today, if you can offer, if you choose to, some sort of concise explanation for what in god's name is going on with fed and this foreclosure and this whole thing with the consultants.
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do you want to address that al? >> yes, let me try to do so briefly. today, the gao issued a report that criticized the fed for flawed review of foreclosure documents. talked about procedures and monitoring consulting firms. so let me say that the fed undertook an indie band of foreclosure review in order to help borrowers -- an independent review, who have been financially injured i service -- servicer errors. we worked jointly with the comptroller of the currency. they took the lead in this effort because they supervise most of the servicers that were involved. and our prime objective was to get help to borrowers as quickly as we possibly could. well, it turns out that over
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4 million borrowers were likely affected. and in getting remediation to them turned out to be an immensely complex, slow, and costly process. so initially we believe that the review was something that would help, but once we're in the midst of it, it became clear that the review was serving actually to delay getting meaningful help to borrowers. this is obviously a development that we were not happy with. but when we realized that, we just thought that we needed to go in a different direction. and we tried to take what we thought was the best available option at that point. and so we are in the process of getting money quickly to
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borrowers, and that should be happening within the next weeks and months. we think that that's the best option. the gao is provided some useful recommendations for how we should continue working with the few servicers that were not part of the recent settlement, and we will take those recommendations. >> if i can translate that into journal these, always a risk, does that mean that if you lose and which do not, you would've done it -- if you knew then what you knew now, you would do it differently? >> absolutely stick very specifically, what would you done differently, do you think? i'm not meaning to track you, you know. i promise -- >> so, perhaps we have taken an approach of a similar category
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-- categorization of harm as we have done now, and not getting involved in detailed reviews. >> more money, less process. >> right. the money had been agreed on was being eaten up by very costly reviews and spending money for consultants. and these reviews turned out to be commonly, a file might be 2000 pages or more, and the review could take 10, 20, 30, 50 hours of a single file. and that turned out not to be a workable approach. >> okay, fine. we will let it go. is there any other questions, good luck in trying to get a better answer. now, also one thing before i go on, your definition of inflation
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and the feds is not the same as the definition we write about in the newspapers, in newspapers we write about the consumer price index. you use something called, if i can remember this, the personal consumption expenditure index. >> the cpe deflator. you've got it. >> thank you. see, i am a good student. .. we don't just monitor one single
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index and blind ourselves to what is going on with the others. we routinely look at the consumer price index, the pce price index, and a variety of others of inflation that try to give a good sense of what the underlying inflationary pressures are of the economy. so what we defined our longer run objective to be concrete in term of the pce price index, we, by no means, focus -- solely at one number and we look at the whole variety of them. the second thing is that over most periods, all of these tell the same story. and give roughly the same signals about what inflationary pressures are in the economy. the cpi that you focus on most
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of the time and the pce index really move together very closely. the cpi is produced by the labor department, it's the best known index. the pce deflaters is produced by the commerce department. i would be happy to point to where you can find it. >> don't charge me too much. [laughter] many. >> it's great. >> my lawyer can't afford anything. >> and i know why did we choose the pce rather than the cpi? in point of fact, it's a more comprehensive index with many method logical advantagers. it covers a broader array of goodses and services that the typical consume buys than the cpi does. in particular medical health
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care expenditure are extremely important to consumers and the cpi coverage is really frankly very limited, and i think it's widely agreed that the pci does a better job of covering medical care costs that are important to typical consumers. now, it just so happens that the over the last year, the pce index has increased about 1.3% over the last twelve months where as the cpi increased 2%. right now with the point there's a difference and part of me reflects the fact that rent has been increasing and the cpi gives a larger weight. this is an aberration, and by and large these don't tell different stories about the economy. >> thank you. now i have learned something. i have so much to learn. i'm almost at the edged of my
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questions. it will be someone else's turn soon. all right one of the things that i recognize, because i'm old and i saved, is that the programs you have of holding down lower interest rates who displaced me. i have the same profit from the bond market to the stock market, and -- roughly a billion times it is that in order to bail out the people who worry prudence you -- you the fed ended up having have to penalize prudent people. we talk about this. it's a known problem. do you want to discuss the trade-off in that or any aspect of that. whether it involves you, which i'm sure it does. >> i appreciate you raising this question. i'm very well aware that this is
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the important in a legitimate concern for a lot of people particularly retirees who want safe way to save, want to have bank depositive it or hold cd and the amount you can get on those is close to zero. we hear all the time, of course, it's natural it is difficult. there's no question about that. so why would we do this? the reason we do it, and the reason we think it's in the best interest of the economy we think it's a way to stimulate the faster economic recovery. we think that's going to be good for virtually everyone in the economy even including those who are suffering from low returns on their cds. because when you think about
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people, you know, they're not just one dimensional. there's more to their lives than they have cds and bank depositive -- depos it. they are exposed in some way to the stock market and the policy we're pursuing probably have been good for stock market returns. most importantly, what we're trying to do is stimulate borrowing, and a lot of people even retirees borrow whether to refinance a mortgage that helps them or to buy a new house. and they have children and grandchildren and then they think about children and family's futures. can my child or grandchild find a job? what about me if i want to supplement my income and work
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part time? can i find a job? i think when people think about the different concerns they have with the come, and all the different hats they wear, and think about what the broad sense of consequences is. the low rate of return on safe deposit that is cost. there are a lot of other benefits. i'd say, look, how are we going get interest rates up to normal levels when we have a normal economy? and when are we going have a normal economy when we're finally able to stimulate the strong enough recovery to get things back up to normal? >> okay. i'm not going to step on that egg supply. i'm not going to ask the rest of my questions because that's a good answer. and it's getting late. so it's time for the house to ask. just identify yourself, your organization, promise you're a member. you're standing at the
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microphone is your guarantee you're a member. try not to be as long winded as i am. >> [inaudible conversations] thank you for joining us. on a panel this morning a couple of interesting points were raised. i wonder if i could get reaction. one, the fed policy and low rates was not effectively enough stimulating the broader real economy in that was it was being used to thebacks institutions like banks and other players in the space. so my question then is could you tell the audience here what you thought of that? the second point that was raised is that it's either incorrect or ineffect yule that the fed is mandated two things. and the full employment. the fed might be better off.
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>> with respect to -- housing is beginning to recover in a way that is convincing and house prices are going up and they're going up more than i would have expected six months ago or even nine months ago. i think it's making a whole lot of people feel a lot better about their financial situation. and of course housing, you know, house prices are down 30%, and housing activity is low but it is beginning to rebound. and they have been holding up well. even at the beginning of the year we had tax increases you would have expected to negatively impact spending. people have to borrow to buy
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cars. and other i don't have any doubt that our policies are contributing to the lowest interest rates borrowing for a car or a mortgage we're looking at historically low interest rates, and i believe that is it's not only caused by our policy, but our policy is contributing. and that's what is going get the economy moving. and that is spending and when we get more construction activity and more spending on cars and consumer durable, that creates jobs and jobs create income and when people have income they feel better about their economic condition and they spend. that is the virtuous circle we need to get the economy going. so that's the purpose of our
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purchases to get interest rates down. i think it's been successful. there are a lot of studies and i think the general conclusion while this uncertainty about how large the effects are, they virtually all come, that i have seen come to the conclusion that the purchases have been helpful. my guess is if you ask bankers, bankers, frankly, come in and complain to us about low interest rates and say it's hurting them not helping them. so on that, you know, we could debate that. but i don't think that would be the general view you would find in the banking community. on the dual mandate, let me say that why should we be interested in unemployment and inflation? this is the mandate congress has given us. i'm strongly supportive of it. if you ask the typical american what do they care about?
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do they care about inflation? absolutely. do they care about the job market and whether or not they can find a job? absolutely. these are two things the american public i think cares deeply about. most of the time there isn't a trade-off in trying to achieve them. think of now, we are focused on employment we are far from full employment. is there a trade-off in term of inflation? no, inflation is running at or slightly below our target. i would say that at this point, there are many, many central banks around the world that have adopted what is called formal inflation targeting regime where their prime objective that have been given is it achieve a numerical inflation medium target. if you look at what they do and you look at the mandate you see
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for almost every one of the central banks, they're also encouraged to use monetary policy to support economic growth and job creation to the extend there are not serious long lasting trade-offs. if you look at the behavior of other central banks, the bank of england over the last several years would be a case in point. will they are just as focused on both objectives, i would say, as we are. practically speaking, there isn't that much difference if any between what the feds doing and what other major central banks are doing. >> thank you. i think we're going have -- [inaudible] for the last question. i think we're out of time and kevin is going to shoot us. [inaudible] can we go long? go long. just like football. >> cnn money. among the fed watchers right now, you are considered the
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favorite to follow ben bernanke should he step down when the second term ends january. if that were to happen you would be the first woman to head the federal reserve in the 100 year history. i'm not going to ask you about that, i know you won't comment. [laughter] the old boy's club so does broader economic professional who is made of a third of women. i'm wondering for you can comment on -- do we need more women to lean in to economics? and lean in to the leadership positions at strang banks? -- central banks? what could that mean? >> thank you for the question. yes, at the highest level in central banking, there are very few women. but i am pleased that the representation of women is increasing a lot at other levels and lower levels of central
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banking and in the financial market and institutions more broadly. i taught in an mba program for a good share of my career, and since over the twenty or thirty years i did that the representation of women in those programs? in general and finance increased dramatically. we are seeing women get ahead and making a difference and moving up to the highest post. and i really think that this is something that is going to increase over time and it's time for that -- it's time for that to happen. it's a great development. >> my name is greg fields. i'm currently a research fellow at harvard law school. my project that i'm working on is dodd-frank. one of the things i'm interested in your opinion on is why is
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there such a plotting pace of implementation in dodd-frank, what are some of the institutional challenges for an organizational -- organization like yours as that ball is implemented? >> well, it's been an enormous challenge to implement all that is in dodd-frank. as soon as the legislation was passed, we sat down and made a list of all that we had to do to carry out what the fed's part of this was. and we identified 252 separate projects. >> that's all? [laughter] >> well, there were items like -- small things like that. >> which nobody still under-- understands. >> some were pretty small. there was things like that qualified residential mortgages and other things that are really major efforts.
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so first of all, there's been a huge work. in the united states -- first of all, it's complex. we don't want to put rules in to effect that have minute thoroughly thought through where we need to get input from the public, public reaction, we put out notices of proposed rulemaking for comments, we are working jointly with many other agencies here in the united states to develop these complex rules. and it often takes time to try to reach agreement. we want domestically a level playing field in terms of if we all agree, you know, for different part of the financial industry what the rules should be. but even more challenging and very important the financial industry is global, and we don't want to put in effect rules in
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the united states that will affect our institutions and find there are completely different rules and other parts of the world. ideally we would like a level playing field globally, and we don't want to set of regulations where as soon as we implement them firms leave the united states and go off to another country because our rules are tougher or vice versa. we are working very constructively and actively with leaders around the globe to see if we can move together jointly. and i have to say i understand when you say this project has been slow, it's been a couple of years now, but gee, if you saw how much is going on and how much constructive dialogue is taking place and how we have
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gotten agreement on so many important things. on enhanced capital requirements for globally active banks. we are agreed globally on reforms to derivative, on liquidity standards. i think we're really making a lot of progress. i know, when you say why couldn't that have been done in six months, you know, we want to do this right. we want to move forward jointly, and this is a great deal of what we're spending our time on. >> it will be before the end of 2015, won't it? when you loosen everything and it starts again? [laughter] >> i sure hope it's a long time after that. >> okay. >> hi, doctor -- [inaudible] from reuters. i was wondering for you could comment on the bank of japan's aggressive monetary stimulus and overnight. do you think it will work? how does it change your thinking about the global economy and
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u.s. moll tear policy? >> well, i guess i prefer not to comment on the details of what the bank of japan announced. but, you know, i certainly say that here is a country that suffered deflation for well over a decade, and had very weak economic growth the fact that nominate gdp in japan today is slightly lower than it was, i think, twenty years ago. i mean, that's really remarkable and resulted in all kinds of problems for japan. i really think that taking an aggressive approach to try to end deflation is something i certainly understand. and, you know, when you look at central banks and advanced countries, united states, europe has slightly different set of problems, but very high
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unemployment. the united kingdom with slow growth. japan we all face a common situation we had disappointing economic performance. we are taking all steps, different packages of monetary policy steps to try to address that. so i think that is something that is completely appropriate. -- these policy can have some impact on exchange rates. you know, issued a statement saying we really think it's entirely appropriate for countries to use the domestic policy tools to promote key domestic policy objectives like trying to achieve full employment and price stability. so in that sense, you know, i
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think what japan is doing is something that is in their own best interest. it's something that if successful will be good for stimulating growth in the global economy and will be good for us too. >> okay. last question. okay. >> aaron -- finance -- hello dr. evans. you said your speech in twiefn didn't [inaudible] quote because the public believed the fed would keep inflation in check. it was the evidence of that. do you think the public has that faith in the fed? >> i'd say the evidence that people believe the fed would keep inflation in check, we look at many different measures of inflation expectations both survey-based evidence and evidence that we try to read out of financial market prices like the difference between nominal
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and inflation index bonds. if you look throughout that period, we can see that inflation expectations remained extremely stable and well anchored. i think the other thing we can see is in contrast to the 1970s -- although there was a sequence -- they were unexpected. in 2005 oil prices rose. people thought, oh, well that happened once. that's going the last year. and it turned out the next year and the year after. in each case, you know, oil prices rose there was a sequence of increases in oil prices in each case -- in each year they were unexpected forecasters were surprised. one issue is, okay, we saw it show up in energy prices. did we see any past route to other prices more broadly? so called core inflation during
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the years there was little or no pass through in to core inflation. . >> we're not going have a debate here. [inaudible conversations] >> err and the other factors that caused the lack of pass through is what i'm asking. >> presented the past through. other factors deflation, technology, many other factors. >> well, i guess i would just -- i can't move -- prove this to you. i i would contrast it with the '70s we saw shock of that that by trying to demand wage increases which there their employers gave and past through went to inflation and we saw inflation expectations spike.
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and we went in to this set of oil shock increases in 2005, with now a decade and a half of a really strong record in terms of having kept inflation around 2%. i think that was the difference. but, you know, i can't disprove that there's some other theory that could explain the same thing. >> dr. yellen, thank you. i hope you don't bill by the hour. [applause] [laughter] [applause] >> thank you very much. [applause] some of yesterday's session of the society of american business senators and writers con sense. in a few minutes we'll be back here live for day two of the con conference. a discussion on changing the current tax system. it looks like they getting red i for the next session. more about the programming tonight. here on c-span2, we'll feature the booktv in-depth interview
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with senator tom coburn of oklahoma. a medical doctor who served in senate since 2005. senator coburn is also the author of "the debt bomb." booktv tonight in prime time here on c-span2. over on c-span 3 this evening history in the u.s. beginning at 8:00 eastern with the celebration of the 1913 women's suffer at 9:30 we visit the sewall-belmont house. and at 9:55 eastern. a lecture on the equal rights amendment. americanist i -- history on prime time tonight on c-span 3. on c-span earlier today we covered the export inport bank here in washington. among the speakers was
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highlighted some of the top concern with the economy. here is a look. i would like to ask what keeps you up at night? >> well, since ashumerring this position i sleep less well. well, i worry about the sustainability of of the economy. europe is -- being dealt with in a in a good way. it's long-term problem. i think the exporter oriented economy given europe's problems and our slow growth -- our slowing down continuing to perform okay.
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not as though they have in the past. you know, we have our own unique problems at this point with government increasingly -- there i use the word dysfunctional. don't quote me, please. i'm sure i will be. [laughter] you know, the issues that people are wrestling with that need to get resolved hopefully sooner rather than later but, you know, i'm not expert. i'm not terribly confident that a big-bank solution is going to be found here. all of that keep me up. a., we have exposure in the various countries. we watch it carefully. another issue that keeps me up is cybersecurity. you know, secretary panetta in his last or one of the last speeches described that as the single biggest threat to the united states. you know, and the secretary of defense says that, i guess you have to listen. certainly we have been
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targeted. all of the big banks have been targeted. cybersecurity is not just about hackers. let's put it this way. it's not about guys trying to get the credit card number. it's an instrument to the state in the indication many economies it's been lots of press about china, iran, israel. it is a reality, and these are very, very sophisticated people. so building fire walls against some of the activity is very, very difficult. i think we have a very strong team, but this is a threat, and it should keep us all up at night. it's a tough one. and we can watch all of citi group chairman annual conference today. remarks by joe biden,
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transportation secretary ray will -- lahood and many others. check out our website c-span.org. going back live to the society of american business writers and conference for the last panel of the day on changing the tax system. looks like the panel is seated there. as we wait for the live coverage to begin. a bit of news from today. the labor department released employment report today. 88,000 jobs were added in march. the fewest in nine months and the unemployment rate dropped slightly to 7.6%. the associated press writes while it's the lowest in four years, the rate fell only because more people stopped looking for work. [inaudible conversations]
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[inaudible conversations] [inaudible conversations] as with wait for it to get underway more of president obama is scheduled to release the 2014 budget plan on april 10th. that's wednesday of next week.
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politico is writing the president obama will seek significant entitlement cuts. the new tax revenue including a new cigarette tax. in what the white house is portraying as a cover budget. the story goes on to say that the controversial element of the president's proposal is inclusion of the chain cpi. the adjustment that would over time reduce cost of living increases to social security and other federal benefit programs. effectively, a cut to social security benefits by tieing in to inflation. on capitol hill both the house and the senate have already each approved different budgets for next fiscal year. [inaudible] [inaudible conversations]
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[inaudible conversations] [inaudible conversations]
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[inaudible] [inaudible conversations] [inaudible conversations] [inaudible conversations]
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[inaudible conversations] [inaudible conversations] [inaudible conversations] as we wait for the panel to get started. new information about tonight on c c-span. husband and wife documentary producers -- talk about their
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film. it addresses what they say is misinformation about the process of hydraulic fracking for natural gas and some of the environmental concerns that happens at 8:00 on c-span and at 9:00 take your calls and tweets about that. live on c-span. while we wait for it to get started. we're going to watch this morning's washington journal talking about immigration and gun control. >> host: editor and pub publisher "the nation." thank you for joining us. social program face a cut back in president obama's budget. we expect to see this released next week. and the article says that the president plans to propose a new inflation formula that would have the effect of reducing cost of living payment for social security benefits. there would be protections for those in the low-income bracket and old beneficiary.
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what do you think about this? >> guest: we have seen the new job numbers come in this morning, and every time those numbers dip, i think it's now 7.6% this morning, it's a hopeful sign that there's a recovery kicking in to place. i think the misplaced obsession with debt and deficit which the social security cut is part of is just crazy. social security, by the way, shouldn't be in the same sentence with the word deficit. the social security has nothing to do -- >> we're going kick it off now. i've within told to keep it to an hour. we're going try to do that. i'm jody schneider. i'm the team leader for congress and tax policy coverage of "bloomberg news" here in washington. we have an -- interesting panel on one of the big issues on the hill and in the administration and the president's budget coming out this week it will be debated again is tax reform.
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and where is fax reformed headed? i would like that introduce our panelists. we're going kick it off and start the conversation. we'll leave time for questions. i've been told to remind people that only members can ask questions. please identify yourself and news organization. and to use the microphone. on the panel this afternoon we have first of all, chris bergin the president and publisher of "tax analyst" and the organization left material outside letting you know how to get in touch with them. he's written on federal tax issues and worked in tax publishing for thirty years before joining tax analysts in 1990. he managed several tax products and over the past twenty years has been responsible for several blogs including serves an an editor for tax notes. i'm sure you know the publication. the next we have john traub.
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he is -- he joins the washington national tax practice of deloitte tax l. l. p. in june of last year. as managing principle of the tax policy group. he leads a team that identifies and evaluates and monitors legislative proposal and interprets issues surrounding the issue of application on behalf of de-- deloitte's clients. his most recent senior staff position in the house, and during his tenure of staff director he was responsible for developing legislative policy and strategy on issues in their jurisdiction including taxes, health care, and trade. he played a key role in the tax relief act of 2010, and the budget control act and also the super committee. some of you may remember that one. and then last panelist is path driessen. of bloomberg government devoted to analyzing the effect of
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government policy. he worked at the treasury and joint committee on taxation as a revenue estimator for twenty eight years. he specializes in accounting and international tax issues and received a ph.d. from the only school in this year's final four, listen carefully here that graduated a u.s. president and the super bowl winning quarterback. there's four such colleges in existence. the only one in the final four. can anyone guess? michigan. there you go. good job! >> michigan state -- [inaudible] [laughter] >> i want to kick this off by asking the first question and i asked panelists to have thought about the question before. they'll make some statements on behalf of the question. but we hear so much on washington about tax overhaul. everybody it was a big issue in the campaign. both candidates said we should make it simpler. and we hear it a lot for the
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past two years, bipartisan talks about tax changes centered on creating a frame work. we haven't seen that grand bargain instead congress and the sprt cut spending and raised taxes and separate laws. yield nothing framework, no bargain, and no agreement on whether taxes should rise again. so my question to kick this off is an overhaul of the tax code likely to happen in the session of congress? what are the impediment to it happening? >> sure. >> thank you jody. well, i consistently have been saying that i don't see how we get any kind of tax reform this year or during this administration. i say for several reasons, i think there's a lot of reasons. i won't say them all. leave some to the only panelists. i think there's a lot of them. first of all, we can't even agree on in the town what the tax reform means. the president thinks it means to get more money.
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the republicans think it means it's a way to lower the rate. i'm not sure how you pay for that. but that's a sticking point right off the bat. i don't think you have any presidential leadership here, and i think presidential leadership is pretty necessary. that's what it took in '86 those who were around in '86, i cautioned this is not 1986, and some of the lessons we learned from '86 probably don't apply anymore. i still think having the buy in to the president is kind of important. in this administration doesn't seem to care about what i call classic tax reform. that's fine. that's their prerogative. in congress they haven't seem to coalesce around the issue either. so those are a couple of reasons i don't see it happening. as pessimistic as it sounds, i'm optimistic at some point in time, maybe five years or a little less, we're going have a
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tax overhaul of the individual and the corporate tax systems. i don't see how we can can't. there -- they are a mess. nobody understands them, they are completely complicated, and not making enough revenue to meet the expense of the government. i'm more optimistic in the future and pessimistic in the next year. >> so i'm probably the optimist at the table. there are a number of impediment. chris is right. he touched on a handful. i'll mention others he'll probably agree with. you have fight whether the proper distribution of tax liability. how much should the wealthy pay versus the less wealthy. have fights between corporation and pastors. and companies internationallingly and those operating domestically. you have manufacturing heavy companies versus the service sector. you have revenue constraint in the absolute term but also in the ten year revenue baseline
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and the longer term. again, these are strategy reservist. having said that, i think the time is good now as it will be in a long time and better than it has been since '86. you have the chairman of the ways & means committee. and dave who advanced ball tremendously by putting out not just white paper and hey we should do this. putting pen to paper and showing nuts and bolts of doing reform. he's in the last term of chairman of ways and ways & means. obama is also in the last term and chris is correct. the president wants additional revenue. the house of representatives aren't going to pass a naked tax increase. they say we did our part in the fiscal cliff ball. there's no more coming. revenue enhanszing tax reform is a possibility. so long way to go it's a technically vexing and daunting challenge, but you have a chairman of the ways & means and
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chairman of the finance who want to do it. there's a lot of reasons why u.s. is falling behind the rest of the world. the corporate rate is the highest in the world. we have a worldwide system which we can get in to. it's very -- creates all kinds of problem for american companies trying to compete abroad. you factor them together. there's a lot of things pushing toward the prospect of reform this year. >> thank you, john. i think there's a couple of things to look at. one sort of leans in favor of something happening and one leans against. the eye teem that leads against. if you look at what the corporate sector is how much renner new it brings and how much activity it undertake as the american economy. it slunk. there is not as much to work with as ten, twenty, thirty years ago. there's not as much in terms of corporate receipt to work with. so if you're thinking about reform, that can go both ways. that can say, it's not as big sector as it used to be.
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maybe because of the tax code or other things. maybe it provides an impetus for reform. or a so-what moment there's not corporate activity out there. unless you go broader than looking at the -- you wold do reform at all. the second thing, i think it may play in favor of corporate tax reform is does president obama want to make this a reach across aisle and grab an issue that is traditionally has been an issue on the other side. is it comparable to clinton's welfare reform movement or george iv iii change in prescription drugs or something when he starts on the path he'll back away because of the opposition. it is it like social security privatization? i think it's it's up to the president and the staff whether they want to use it to reach across the aisle. i think everybody will admit the person john mentioned the administration if not if asleep
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has been dormant and hasn't pushed as a main item. it could be the item they use to reach across the aisle and shake hands with the corporate sector. i should add a corporate sector is particularly the fortune 100 that was supportive of some of his tax proposal have been in the last year. the one could argue there's ships that have -- chips that have come due. >> chris mentioned 1986, which is often mentioned as a model or certainly the last major tax reform over haul we've had. i'm interested from all of your perspective how useful a model 1986 is. what changed since then? not only in the tax world but without outside group and the media. if we get '0eu68 who plays bill bradley and who plays dan? think about the world we live in today. i was talking with somebody on
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the tax of '86 which reminded me at the time when the draft of the bill came forward lobbiest would fly to the hill as fast as they could. get a copy and photocopy as many as they could and fedex to the clientd. you have the pdf file and it's out there instantly. we have news from abc and nbc and the fine organizations as well. but today we get lots of our news not from there, but from daily show and rush limbaugh and folks who don't necessarily have a strong desire to provide balance view of the issue. you have talk radio and you have the ability of interest groups to communicate on a real time basis with the constituents. in '86 if you want a protest, the congress might take a dent out of the benefit. so you to get a postcard drafted, printed, mailed hope they mail it back. now you press one button and
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they are e-mails going out. and e-mails coming back saying don't do. it the dynamic the wall of noise created so quickly will overwhelm congress. i strongly concur can path's point. you need the president to provide the air cover to provide the strong leadership to get this done. ask member of congress to overcome that wall of instay contain use news cycle is concern difficult to do. again on the question of who is bill bradley and ross is interesting. so you to be careful not say it's nothing like '86. job makes great points. the tax system is different than it was in '86. actually i was child of the '86 act to look for them. i don't see ross, i think congressman camp could be bill breadly. he's challenging, thinking on a very high intellectual level.
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he's doing it the right way. so at least we may have one player in place. but again -- i have to constantly remind themselves this isn't '86. i think '86 stands for the model it can be. something can be done. that the two sides can get together. but i don't see it yet. also, i think the point that john makes is really important. in '86, there was sort of a groundswelling of public opinion that the tax system wasn't fair. and even though the -- i think the journalist play an important role. yawn and i were talking about this. i brought the book here which is worthwhile read. and i think part of it shows the influence of the press in getting the public more and more interested. if that starts, if the public gets more interested, then i think it may push the politicians along. again, i agree with pat and john. the president has to provide air
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cover. but when we -- if we see barack obama sort of turning to ronald reagan. might be in the best interest, pat, you might be right. then isle get optimistic for the short term. >> i'm looking to somebody to be dick a sinister but a good guy in the end. >> do you have any candidates. >> none right now. as somebody in the treasury in '84 did a footnote or two in treasury i i was talking to john about this before the session. i'm struck by the way that chairman camp's three discussion papers sort of serving the purpose in some ways. what treasury one served which is kind of a sounding board of places that where there would be a broad ranging intellectual research occurring. you may remember that treasury one was something that the white
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house didn't want any part of but let the treasury go off on our own with the various academic and whatever. it didn't last too long. it was popular among communities that brought up a lot of opinions. i see some similarity in camp's discussion papers and to be fair of some of the hearings that have been held on the senate finance side, i see that as a good sign in terms of things coming together. again, not to be yin and yang on this. the negative is, i think 1986 was a noble effort. if you look at the literature, if you read mike graph's and other people. if you look at the data it it started to fall apart maybe within four or five years in terms of revenue and the support. there are at love reasons for that. if we want to make '86 the standard. we should think about thong
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lasted before it crumble. we have settlement of the '86 act. i think for a short term political success it deserves some points. in term of the lasting part of the code particularly in the area i used to work in which is international. it's hard to find the '86 part or sigh it to recognize it anymore. >> i think that's a great point that pat makes. the ink wasn't even dry after october 22 1986. it seemed they almost started to change it right away. in 1988 they came up with my favorite title for a bill. it was called tamyra. the technical and mislab use act said it all. we should have named it we can't keep our hands off this law. we may get tax reform. how long it lasts, -- i hate to sound like a cynic. i'm usually optimistic. that's great point you make, pat. >> my next question is a political one. sort of how washington works one. if we start -- if it starts roll
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ago long, how do you keep the mom -- monumental going once people and the interest groups see the pain that would occur with tax increases or the loss of tax breaks and start squealing over them? >> yeah. i sort of mentioned this earlier. it's an important question. members of congress go home all the time, you hear them say it on the campaign trail. it if we can cut funding for nasa and foreign aid we could bail the budget. do we spend money on nasa and foreign aid. of course. we know where the government spends the money. the corp. lar already ray -- corp. already blank blng the bit the big sees the exclusion of tax to health care. now as a partner of the firm i don't get employer-provided health insurance. i view that as an egregious loophole. it doesn't benefit me.
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i own two houses, the ability to deduct the morning interest is a central feature of american policy. there's a fundamental mismatch of what people view as loophole and benefits them. do do reform you have to take on things that people don't view as loophole. and the loser by nature tend to be more aware of the losers and more upset about it than winners who are defuse and benefit only. the president doesn't make the case rodely. we can't let special interest say we want reform don't touch this or that. the president will make the case to the public that it's all of our best interest for reform the
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base and lower the rate. if taunt a business only tax reform and particularly a sea corp. only tax reform. if we're talking about a broader tax reform or perhaps someone on the business side that would be the converse of what happened in '86. a lot of economists think we should go to another revenue source whether consumed income tax or a vat or whatever. that usually gets dismissed pretty quickly and the economists retreat out of the room. but that would be a way on the business side to find a new source of revenue and sort of solve some of the problems you mention which is you have businesses that don't want to give up all the various -- i
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won't use the word loophole. tax expenditure that they have. and if it's not route, then perhaps there are some things you do retroactively when you tax so you hurt people for the past decisions rather than the perspective decisions. but again that's another item that economists are not necessarily high on the political. >> and if i can add one thing. i get employer-provided health insurance. we can't touch that. [laughter] but the myth here is, you know, there's 1 $1.3 trillion in a magic place. it's not as easy as the politician make it sound. we have you can't touch the interest. there's a not that much money there to begin with.
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it's not a golden magic bullet. >> this is a little bit of a how to watch this game question. if you're watching this from the outside within what are the measuring process to see if anything is happening. what should you be looking for. i'm to watch more than the debt limit fight this summer. i was on the hill during budget control act tbfn and the sequester became of the sequester on the hill also during a super committee and my boss was on it. and the magic bullet that we were changing at the time was instructions that they were going compel congress to enact tax reform or entitlement reform.
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it's like lucy telling charlie he can kick the football. we didn't do instruction in the fiscal cliff, sequester mark two. that would be one of the things that would be an event if congress finds a way to itself to the mass and say to chris' point. the choice is hard. commit ourself during reform and see what it is we committed to do. which expenditure we have to deal with it to address. it would be the seminole event take this from the possible to the probable. >> yeah. we just did a study at bloomberg asking seventeen experts including john the very question you raise what would be the sign. one of the most common responses ways & means bring a bill out of the committee? just to give equal treatment to both body, i think i would --
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i'm going watch what is going on in the senate. there is some interesting things going on. max bacchus up for re-election next year. it looks like at least from the outside and i'm fortunately i'm not on the hill anymore. it looks like there's maybe a little friction between the budget and the tax committee on the senate side. particularly with respect to the resolution that came out. the discussion there at taxes was not nearly as detailed and sort of protax committee as the comparable discussion on the house side. sister -- it's something that splipped over the -- flipped over the yours. -- years. that may come right now i see a freeze going on on the senate side maybe within democratic party. if that unfreezes and i think that would be a big move.
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>> [inaudible] >> the fact that max bacchus didn't vote for some of the tax reprovision in the budget as the chairman of the senate finance committee, does that telling that the budget resolution last week? >> i wouldn't make that forecast. the flags are going up. i would never try predict why he did or didn't vote. i would say if you read the two different documents, and you look at them closefully the area where they discuss taxes. the house document is very much says we're going to hand it over to chairman camp he's going work with us and the parameters are seem to be looser as where the guideline on the senate side, i mention the specific revenue target for a pickup don't say a lot about corporate tax reform and so i think there's -- you can read the two documents. i think that says as much as you need to know. >> i think i look at this
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differently. if you look at the senate, you've got the president and -- a lot of the senate democrats say we want to use tarks reform to raise revenue and the republicans are saying no. from my journalistic side where i come from, the sign i look for and i think this is similar to some of the things john said. maybe said in a different way is tax reform, to me, is not about partisan politics and everything. when tax reform starts moving for what i look for special interest politics. people start lining up and building coalitions and making deals and if you really talk about monument team and you get to a stage where there are elected officials and it happened in '86 who say i don't like it. but i'm not going to be the one have to vote against it. i think you have the momentum. >> this is going to be my last question before we open it to
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all of you. if a big tax overhaul falls apart. is there something to be done are we done with major tax legislating for the congress? >> i think it's almost all or nothing proposition. pat mentioned the idea of maybe something less like a corporate only or business only solution. i have agreed with everything that pat said. i disagree with that. >> want my numbers? -- [inaudible] >> those numbers weren't your fall. i think that given -- hinted an open economist is given how much american business income is earned in past reform, partnership, l. l. c. i think it's hard to disaggravate business activity from the individual returns of which the owners paid taxes. so if tax reform falls apart, i think you will, you know, the congress have some house keeping to to. they need to deal with the
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extender. the expiring tax provision. the r&d credit, that congress routinely extends. it's in the hasn't of extending them retroactively. a big deal on reform, i don't see a lot of little stuff in the wings for the balance to the cycle. >> yeah. one thing, jody, that is interesting to me is that if you look at the source of the movement for particularly for the business tax reform, i think you find one of the sources is with respect to the treatment of foreign source income and we had a major bill in 2004 with the large reform of the treatment of foreign source income. it surprised me a little bit that the momentum and the drive were reform in the international area seemed to keep going. there was an appetite that wasn't satisfied by that. i could see, like rosanne told
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us for one of our report it is possible they could, for example, just do something on foreign alone. i think there's enough moving parts there at chairman camp's first draft if everything fell apart there could be a move there. it's still a highly political area even if you install some of the revenue problems. i think that's another area where you are going have problems what is inside the house and inside the state and in both cases lead by folks named levin on one side. [laughter] that won't necessarily agree to some of the proposals that are going on in that area. >> i pretty much think it's an all or nothing proposition. i think if the politicians in washington, i think know that there's a poster child here. and it's small business. whether we agree with it or not. it's always about small business. they are creating lots of jobs and doing only good things.
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you can't, i don't think, reform over in the large business side without dealing with the other side and that's all kind of proposition. i have a different angle than pat's. i agree with him on the foreign. i think if everything lost, they might be able to do that, but i wonder in the environment -- i just saw a story this morning about the multinationals that don't pay taxes. there's a -- at least in the u.k. there's a moral obligation to pay more than you legally owe. i did learn that. but apparently the new concept. there's potentially bad publicity out there. some of it is wrong warding what -- regarding what the multinational will or will not do. if that moved alone, i think there might be a lot of interesting news stories coming out >> i think actually chris hinted on the mortgage development tax policy. some of you may have seen companies doing business in brit
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tab which have voluntarily paid more taxes than owe under publish pressure. there are so many interesting things about it. i don't know where to start. one that strikes me worth noting, many countries have enacted aggressive tax regime to -- cut the corporate rate, we will eliminate tax on foreign source north carolina. we will provide other preferences the companies will say i -- give the tax. and the companies payless taxes. there's outrage. it seems to me an odd juxtaposition. going forward that tension that chris highlighted is interesting one to watch. >> you mentioned it's possible the u.k. may have taken their queue from romney and the terrible contribution with the personal return. he might have had that big of global reach. >> as we were talking about before, and as my deputy
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publisher reminds me names sell newspaper and headlines matter. this is -- 100% i agree with john. it's nothing that watch. what is going on in the multinational area and it's fascinating from all facet name cell newspaper, ge paid no taxes. go read that hmm. >> good. well, i'm opening to the members to ask questions. please identify yourself and news organization when you ask your question. >> hi, dave beal, free lancer from minnesota. how much more -- question for chris or either of the others if you can chime in, if you want. how much more fully developed, quote, unquote or maybe on steroids would be tax expenditure world be now compared within 1986? there are a lot of different measures of that. there might be some of them good or not so good like how many tax attorneys and tax accounted
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assistants are there now versus twenty five or thirty years ago. how much lobbying expenditure is there by various special interests with interests in tax expenditure? >> i probably have to give you a guess. probably a lot more. it's a big industry. and it's legal. but, you know, one of the reasons general electric pace little in taxes is they are very aggressive. they view the tax law as a profit center. they view the tax department as a profit center. general electric can lobby to get the laws they want that we can't do. they're not doing anything illegal. they are paying taxes. k street is thriving for a reason. there's a lot more, if you look from 'i86, there was a tax act in '87, the act in '88, another one in '89.
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a couple under clinton. almost every year they touch the code. naturally, i think it creates a lot of work for lawyers, of which i'm one. and a lot of work for the lobbyists and the accounting firm in town. if you got rid of the corporate tax. they are brilliant people. if you got rid of the corporate tax system and took all of these brilliant tax lawyers smarter than i am and sent them to medical school we would probably cure cancer in a lot. there's a lot of people doing this. that's the system we have. i don't think you'll ever get rid of it. i don't see how you'll get rid of it. but at the very least, the '86, i look at was cleaning out our closet. i think we try to clean out the closet. but, you know, a lot of very smart lawyers buy our products. so, you know, i'm in the system as well. i'm not criticizing it. that's the nature of the beast to me. >> so if there's a heck of a lot more it makes it more difficult
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to get meaningful tax overhaul this time. >> i think john is the best one to answer that question. >> well, i want to step aside from the comment about specific -- i think that's a little bit difficult to speak to. i think, you know, think wack to chris' perns. mike hutchison if you look at the code, there were fewer expenditure. they were bigger. think about investment tax credit which were big dollar figures relative to what you see now which is a proliferation probably in the number of them but relatively on their own small in size. kind of like the, you know, just a thin mint. accumulation of them tends to be dramatic on the impact how much higher rates need to be to generate the same level of revenue you would name the rates to be.
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and to whether lobbiests are more pref lent than '86. i think that's true of my industry. the role of government has been so mom nant in so many area of our live. and not to be look at, you know, health care look at any subject where, you know, so much more of the decision making made in washington. it's natural for businesses and individuals to focus attention ton -- on it. >> hi, rich with the cnn money. what would you look for next wednesday in the president's budget? that would indicate to you he's serious about tax reform now? >> and i would add i'm the last question. one place you can look, i don't think chris is probably not at liberty to say. if you follow the progression of tax analysts, particularly tax note and the subscription list on the interest. i think that's a barometer for people who are really interested
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and are following the tax area. i don't think you can tell us what your subscription will change. as they have become a major information supplier to lot of people if town. they exist in '86. i can't believe it's in the same category. >> jump in here for a second. we at tax analysts believe in absolute transparency. the i rs doesn't like us for that. the growth of the has been huge between a founding in somebody's basement in 1970 and today. the subscription base is larger. we can get to more people. thanks to the electronic publishing. so we have grown as well. no doubt about it. >> the question -- again, i would -- i look for an optimistic surprise. i'm not expecting a ton of ground breaking items. i think a rule in the budget is
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if you propose in the past budget you can propose it again. nobody expects you to not do so. is it possible he'll put something more than a reform in there? maybe. i think the more hopeful side for me whether or not there's a agreement as part of a trigger in a debt limit deal. >> the other thing i would add is we did have this really unusual delay even for a reelected president. a month maybe six weeks or whatever. so hopefully they were doing something in the tax area, something interesting. if they rebake the same thing as john mentioned. there's a tiredness. if it's the same proposal they have been putting out for four years, that's a problem. i'm not -- i don't think they are going put something major on tax reform. i would be pleasantly surprised. it would be the place to get it going. what do they have 168 hours? it would be a great way to jump
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start the whole thing. i'm skeptical that something will happen. >> i'm set -- skeptical as well. if you see something about reform i would become an optimist not a cynic. ..
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>> it is by no means the majority of either party, and just a handful of people on the left want revenues -- have openly advocated for revenues at that level, that would, i think, didn't the long term fiscal challenges. the long term drivers are growth, spending in medicare, medicaid, social security, and the looming question of how long the rest of the world lends money to us at absurdly low rates. at some point, we have to be serious about spending. we cannot tax our way out of it. tax reform, if it's part of a -- that does it right, can have additional revenue in the system, but not enough to ignore the more difficult and beyond the scope the panel, discussions on medicaid, medicare, social
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security, ect.. >> yeah, i agree. there's a problem in the system called "revenue neutrality," and that means if we go down tax reform, as john said, they pick winners and losers, but at the end of the process, we still raise the same amount of money as before we started. for me, revenue neutrality somehow became a principle born in the 1986 act, i warned myself not to go back to 86 too much. i think you have to have a kind of tax reform that increases revenue. it's not, as john said, going to solve the whole problem, but i don't see how revenue neutrality works with this kind of debt. >> i actually agree. i don't think tack reform needs to be revenue neutrality. you can generate revenue in ways to get bipartisan support, but it doesn't solve the problem. >> right, i agree, totally. >> i think there is only so much
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time in the tax and budget committee, and so if they spend time looking to say if the administration's proposal comes out next week just maybe going to raise -- maybe going to raise a trillion in revenues, unclear what the parameters are, that's time that can't go to tax reform, and so at some level, you might combine the two, but i think -- so the splits are, you want revenue neutrality, just do business reform alone, just do c corp. reform alone or international alone? there's cuts that come out. the -- some optimists think you only have to do another trillion, trillion and a half, or 2 trillion in deficit reduction, and you'll be fine until 20 # 28 when it really gets bad, but it's outside of the ten-year window, so, i mean, in terms of the back and forth going on now, you hear little things on the hill and administration that maybe that
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the deficit issue is not as big as people said six months ago, and that much hated word, "sequester" will disappear. >> bill? >> i'm a freelance writer and let me combine two things for you. one is the prospect of tax reform in the tax -- in the near future, c-corp. reform, whether it's revenue neutral or not, and the other is lobby of small business. business people are envious with others paying no taxes, and one deal with the tax con numb drum is s corporations. there's certain advantages to a small business in doing that. i wonner if a serious reform of the tax code were put forth that would broadens base and lower the rates, would create a
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constituency among small businesses that could perhaps see a lower maximum rate than they pay at the s corporation, and, therefore, become a constituency in favor of reform? >> a few comments. number one, i guess i'm not going to let it go unsaid another time, but there are companies that don't pay taxes, engage in clever moves, which is losing money, a great way to avoid paying taxes. i don't want to let that point go unsaid. if you did corporate reform only, lower the rate from 35 to something in the 20's, dave wants 25, but use that number, whether it's achievable or not is not relevant. corporate rate down to 25, the individual rate, has gone now from 35 to 39.6 plus a .9% increase of affordable care act, plus a return of two very complex pieces of law that are
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hidden marginal rate increases, but they distort the code and make people's lives that much more difficult. i think there's some important policy concerns that happen if the corporate rate's 25 and the interest rate is in the low 40s. in terms of politics is bad -- i mean, it's also bad, i think, in terms of opportunities for arbitrage of the rates in choosing one form over another to take advantage of the different status. that's one of the reasons i disagree with pat on a corporate only solution. you have to deal with them both. top rates don't have to be parallel, but there's an important policy goal to have them at least within spitting distance of each other. >> no, that's right, but, i mean, one of the things that happens if you drive the corporate rate low enough, there's a rate inversion. that means there's incementive for people to form c's, and if they retain earnings, you're back to another sort of loophole
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problem. one thing i suggest, by the way, if we could just get the congress to pass a law that would force ge to be a sub s, and then we could get far along in the discussions. >> two quick things, to john's point, there's multinational corporations that are not only not paying high taxes because they lose money, but they are paying lower effective rates, and sometimes it's not that much lower than the highest statutory rate because what they are doing is perfectly legal. people, like me, and i'm not a recovering tax lawyer, i'm a tax lawyer. people like me help people earn a living and lower rates to the possible legal rate. there's nothing wrong with that. if we do corporate alone, we'll see stories that are not true, and i've had people call me and
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ask me to say things that i won't say. what's important, especially in this atmosphere with multinational corporations, we have to get the facts right which is why it's important for us in what we do to find experts, people like john and pat, get them in the rolladex, a virtual one now, but there's more sites than an emotional prime minister to say it's immoral that you figured out how to fit into my system that was designed to bring you here. that's effectively what happened. >> the parallel to this here, and i love this fact. corporate jets deappreciate at too fast a schedule and should depreciate more slowly making the companies buying them pay more tax, but, by the way, we paid scufflely either 100% expensing or 50% bonus depreciation encourages faster writeoffs of the same products.
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we do speak sometimes of mixed minds about companies not paying their fair share. >> yes, hi, i'm peter coy, working for bloomberg magazine. great panel. very informative. this is mostly for john, but interested in everyone's views. the philosophy of dave camp against the philosophy of barack obama in the white house on taxes, we've talked about the specifics, but do you see areas of overlap where they really do share things where they could make some kind of a deal? >> yes and no. camp is clear, a broader base, lower rate. simplify the code, get rid of economic distortions caused by expenditures causing people to engage in some behaviors and not others for tax benefits in exchange for a lower rate he thinks improves american competitiveness. the president, i think, has said
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that from time to time. in the state of the union, he called for lower rates, broader base, closing loopholes, but a week later gave a speech saying what we need to do is do tax reform to get rid of loopholes without raising tax rates. well, getting rid of loopholes without raising rate is just an increase. he has the choice of how he wants to approach this. if he wants to approach a straight revenue raising exercise, he's not got a willing dance partner in the house. if he wants to exercise it as simplify the code, reform it, broaden the base, lower the rate and the result being increase in revenues above the so-called current law baseline, he would find a willing dance partner. >> it sounds like the only distinction you make is exactly where the rate comes after you've got rid of the loopholes, a twisting a knob. it doesn't seem like a die --
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di metrically different system. >> there's expenditures that i think dave, ultimately, when he shows debts in the court, would have to go after. the place where the president and camp, i think, have the least visible to disappoint common ground, to be clear, it's not clear to me there's not common ground, but on the international reforms. in a nutshell, we have a worldwide tax system. it's not always obvious to me, a u.s. company operates abroad, you pay u.s. tax on all income lfer it is in the world. we operate a worldwide system. most of the trading partners have territorial systems in which the companies there are taxed not at all or only minimally on money they earn abroad. if a u.s. company competes in china, they pay money that comes home if they compete against a germany company without the tax,
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residual implications for how you price your products and want to expand in the growing markets. the president said from various times he's opposed to pure territorial taxes. guess what? so is dave. he's not for that. he wants a 95% exemption system and safeguards to ensure. the president has, and for those of you, one book, a second book, "price of politics," the bob woodward book in which woodward talks about the 2011 debt limit struggle and geithner told house republicans we don't get full territory, but close. it was said on campaign trail, spoken privately, and the great unknown is, you know, we know where geithner was going to go on that, but he's gone. what's secretary lew's view on that. >> i have a weird view on this, and it wouldn't be the first time, but we held a conference
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early on in president obama's first administration with international proposals. although there were people at the conference who came away as barack obama as a crazy socialist. at least i do. the three papers from dave kemp, and he's not a crazy socialist when he looks at the things the president looked at in his first term. i find that a useful, helpful sign if we stop calling -- either side stops calling each other names, maybe we'll get someplace. that's my signal it's going from partisan politics to politics. they have a lot in common. they should sit down and talk. >> last question. >> christie, i have a practice call question. you talked about ground swell, bring tax reform into the fore front. how can we as journalists take this incredibly complicated
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esoteric system and better present it to our readers so they understand both what's in it for hem and how it's going to hurt them? i think it's always very easy to say, oh, my god, they are taking away the mortgage interest deduction, everybody's up in arms. there's, of course, a gift back if you lower rates because of that or whatever, but how do we do a better job of protecting that? >> i can help here. i can help here a lot. get the cards from these two gentlemen, call them with questions. also, i put in the back a list of people from tax -- more than happy to help you, and we're not looking to get our name in the newspapers. if we can answer a question, we will. if we can't, we'll send you to somebody better in town, and it's important to get contacts here. i go and talk to the people who know it's invaluable, and then
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you get it right because there's never one side to a tax story. if we get tax reform, every provision, every proposal is a story. there's a story behind everything that's done. if you find the people who know the story, it helps you tell it. it's fabulous. >> i don't think being smarter helps or eliminatings the controversy. it changes the level of the debate. the best academics are fighting over the very issues, fighting over this issue of a foreign source taxation right now, so i don't think there's one clear answer, but you can definitely raise the bar in terms of chasing down your sources. the other thing that's happened in town is some of the -- in addition to tax analysts, some of thee think tanks in town have gotten bet. aei tax policy center, some of the other place, great sources of information, just like in -- i guess in all of the endeavors,
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you have to watch your source: i'll put it pitch in for my former committee, and john worked with them and asked them to do a lot, joint tax committee, put out thick stuff, tough to read, but they shoot down the middle. congressional research service usually in the descriptions of bills is right down the middle, and some of these things i'm sure you're familiar with. you have a tough -- it's a tough haul. i think when i was in the government and when i worked for joint tax and treasury, sometimes it took me more time to understand the proposal than estimate. i shouldn't admit that in public, but it's a part of the game is understanding everything that's going on. i have a lot of sympathy for people out there trying to write about it. i would use all the sources -- don't use just one. tax policy center won't always say what aei says, and definitely check both places, particularly as you're aware, a little bit back and forth last
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summer during the debate at the tax policy center tried to be a straight shooter, and in many opinion is, they came down a lot on one side. that was a time when people needed to call somebody else to get some balance. >> i know we're out of time. one quick thing, which is, please, don't fall for the cheap headline. there's groups in town who are going to say some outlandish things about -- and we hit about it here -- how many companies don't pay taxes. that's an easy headline to write, get a quote from somebody. in tax policy, there's always more to the story, and just going beyond and asking a couple questions do your readers or viewers a huge service. >> well, i think that's good advice, and with that, we'll wrap up. i thank the panelists, chris, john, and pat for joins us. [applause]
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>> so it's important to remember
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a central banker, his tools are limited. central banker can't control everything that goes on in the economy. >> really? >> i read that. so, you know, writers, like us, it's very important what they do, and they really do shape the course of the economies and of the world. that said, at the end of the day, they do have finite powers to use. when you boil it down, they have a doil, and they can say we'll put more money into the economy or less. it's more complicated than that as you and i know. they can regulate banks, translate things in other ways, but to think that everything that's gone wrong is their fault is wrong. to think everything that's gone right is -- you know, alan greenspan probably got too much create for the great moderation for the strong growth in the 2000s, you know, it's easy to -- to blame alan greenspan and federal reserve before the
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crisis of what we see know is overstating it. >> the creation of the world central banks and global power on "after words" sunday night, nine eastern, part of booktv this week op c-span2. >> where's the predictability? what are the assurances that this committee and the senate has as to where you'll be givenned background and history? >> given the fact i was a socialist in my early 20s seems to indicate fundmental instability. as churchill said, any man who's not a socialist before he's 40 has no heart, and in man who is a socialist after he's 40 has no head. [laughter] i think that evolution is very common in people. >> those two characters that you saw, one was the einstein of the law, and the other the einstein
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of the senate. two trains passing in the night. spector was one of the toughest, hardest smarts to lobby on anything, let alone supreme court nominees. he did his homework. he studied. he was smarter than in a lot of ways, a brilliant judge, taught antitrust law, and wrote the book up at yale. here these two guys were meeting and passing like two trains, and never did they ever come together on anything. >> more with former deputy assistant to presidents nixon and ford, tom korologos sunday night at eight on c-span's "q q&a." >> we talk about the priorities for congress earlier this week in an event held by the national women's democratic club. representative mcgovern who cochairs the house hunger caucus talked about efforts to reduce hunger and poverty and gun
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control legislation. this just under an hour. [applause] >> thank you, thank you very much for inviting me here. this is a very special place to me for a whole bunch of reasons because it was at the women's national democratic club, my wife, lisa, and i had our wedding reception back in 1989. i have not been back sense, but we got off to a rocky start. we got married at sacred heart church on 15th and park road, northwest here in dc, and arrived at the church, there was another ceremony going on. we had to wait in the back of the church until that ceremony finished. we were late getting here, and i remember coming into this -- it was a beautiful november crisp evening, and i came into the -- we were all so rushed, the photographer told me that the guy who was in charge of valet
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parking totaled his car. he was not in a good mood taking our pictures -- [laughter] but suffice to say the marriage lasted. we're happily married. [laughter] i'm happy to be back in the place where it all began. i worked for george mcgovern when i was in college, and he was my lifelong frnd, and, in fact, i was given the honor of a eulogy at his funeral at sioux falls, south dakota, and i go to the events all the time, and people think he's my father. [laughter] he says, well, i'm a supporter of your dad, always supported your dad, tell your dad i was the biggest supporter he ever had, and i tell them that my dad, walter mcgovern owns a liquor store in massachusetts. [laughter] i hope that they'll keep supporting him. [laughter] actually, i owe george mcgovern a great deal. when i -- when i first ran for
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office back in 1996, i was in fall river shaking hands, greeting voters, and an eterly lady said, mr. mcgovern, yes? it was the proudest moment of my life when i voted for you against richard nixon in 197 #. [laughter] so i really didn't know what to say, so i said, well, thank you very much, i hope you vote for me again. she, obviously, did. i won fall river with 70% of the vote. [laughter] you know, i -- but george mcgovern, you know, remains somebody who i think is one of the best examples of public service that this country has ever seen, and he was my mentor, teacher, and i align philosophically with his views. i'm a liberal. i'm not afraid to admit that. i believe in a -- [applause] in a positive vision for our
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government. i don't want wasteful government, but i believe in adequate government. i believe in the new deal. i believe in the great society. i believe in the united nations. i think that body can be of some good to help end violence and bring about world peace. i believe in peace over war, and i think they all of us have to work harder for peace and not be so easy to allow our nation to get sucked into wars, and, you know, we have a great debate in washington right now over our deficit and our debt, and, you know, people say, oh, we have tough decisions, going to have to take back benefits you get for medicare and social security in order to balance the budget or cut moneys from education to make them more difficult for young people to get a college education or cut back on moneys for roads and bridges and infrastructure so cities, towns, and states, but we have the
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tough times, tough choices, and i remind people these two wars that we're in, affection and iraq, still getting out of the wars, were wars that we went into without paying for them. why didn't we pay for them? when george bush went to war against hussein when iraq went into kuwait, that money, he had congress appropriate the funds, and so when the war was over, we department have a deficit in terms of what we owe, but the wars in afghanistan and iraq are the first wars to borrow money from the french to fight the british way back when that were not paid for. add up what the costs for the wars are, you know, how much we're in the hole because of the wars, it's in the trillions of dollars, trillions of dollars.
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a few years ago, i introduced an amendment with the late congressman of pennsylvania and congressman david ovie of wisconsin saying the president wants to take you to war, pay for it. the award tax. if they don't pay it, maybe we ought not go to war. this debate we have right now about kind of tightening our budgets and getting our fiscal house in order, to have that discussion and not talk about what the warrings cost, to me, is just ridiculous. you know, we need to be more cautious in how we get sucked into wars, and extra kateing ourselves from iraq and getting ourselves out of afghanistan, i'll have to say, not fast enough in my opinion, but we need to make sure we don't make the same mistakes in the future. you know, we just implemented
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this thing called sequesteration, about the dumbest idea i've heard in my life. i tell people the sequester in my opinion remits an all-time high in wrecklessness and stupidity. i get it we have to try to find savings within the government's budgets, but the notion that you would do across the board cuts without any care given to where you are cutting, everything treated the same, is just not sensible. if there's a line item in the budget titled "fraud, waste, and abuse," the line for medical research would be treated the same way. it makes no sense. we have this group in washington who have invaded the republican party who i don't think are republicans. i think they are more libertarians. they are people who do not believe in a public sector so
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when people say all the time, you have to imroms, you have to compromise, i'm all for compromise. i get it. i w0e79 get everything i want, but how do you compromise with people who want you to capitulate who want nothing left of government. the more you cut, they don't want any programs. we had debates in congress over, you know, i remember asking why do we need a national federal highway system, and the response is that a republican president,ize p hour, thought it was a good idea for interstate commerce so built a highway in massachusetts to connecticut -- connect to connecticut, just a dead end at the state's border. the idea we have debates today that we had back in the 50s and the 60s is just crazy. i mean, we ought to be moving forward, and i think the responsibility of our government is not to tell you how bad you are. it's not to work to lower your standard of living and quality
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of life, but lifting you up. you know, we ought to figure out how to we help improve the quality of life for the people in the country, not how we throw people into poverty or cut benefits for people who need them, you know, and i think that that's what is missing in the debate. you know, we have a deficit and a debt problem so part of the deal is you get to cut where you can afford to cut, and part of it is you need to raise revenues where you need to raise revenues, but the other part is investment. it is investment. if we invested the way we should in medical research, you know, you would save the a lot of money down the road. find a cure to alzheimer's disease, i don't think medicaid would have another problem, you know? why don't we fix the budgetary problems of medicaid by finding a cure to alzheimer's disease, finding medical breakthroughs to make it less likely that if you get ill, you'll have to be in the hospital to find cures to diseases.
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you know, i talked to medical researchers all the time. i come from a city that, u-mass medical school in massachusetts, one. greatest medical schools around, and, you know, in fact, you may have seen the head lines recently about a two and a half year kid cured of hiv aids. that basic research was done at the university of massachusetts. it's just incredible of the not too long ago, hiv-aids was a death sentence. now we can control it, treat it as a chronic disease and might have a cure for it. that is incredible. you know, it not only will improve the quality of life for people, but, guess what? it saves money. if you want to save money, you have to do a little of investment, not investing in our infrastructure is a crazy idea. every other country in the world is investing in the infrastructure. you know, go to china, look at the incredible investments in the infrastructures they make. they are not doing it because
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they like infrastructure, but because they know it's essential for the economy to grow. you know, they want -- they are thinking not just this year. they are thinking five, ten, 20, 30 years down the road, and we ought to be thinking in those terms as well. so all of these cuts that people are talking about, you know, maybe they look good op a balance sheet this year, but in the other -- in the next year or year after, they will cost us a lot more. also one thing i have been working on for quite some time. i -- i, very much like my friend and mentor, george mcgovern, i've taken on the issue of hunger, not just in the united states, but around the world. i want to talk to you about it first here in the united states. we've get 50 million people, 50 million people in the country who are hungry, and we're the richest, most powerful, most prosperous nation in the world, and 50 million people are hungry, 17 million of them are children. there's not a congressional
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district in the united states of america, not a single one, that is hunger free. every community has hunger in it. this does not have to be. it does not have to be. i tell people that hunger is a political condition. we have the food. we have the knowledge of how to implement, you know, brames -- programs to alleviate hunger, everything needed to end it other than the political will. if it was a war, sign the political will and go to war. we need a war against hunger in the united states, and people say, oh, you know, you're a bledding heart. you can't -- we can't afford to spend more on programs. first of all, it's not all about spending money on programs, but better coordination to begin with amongst the programs that we have. i tell people we we can't afford not to solve this problem. you know, kids who go to school hungry don't learn. you know, you skip a meal, it's hard to concentrate.
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you know, you have young children in emergency rooms who is basically a common cold, but because they are without food, their immune systems are compromised they have something more serious and spend many days in the hospital. senior citizens are in emergency rooms because they take their medications on an empty stomach when the bottle says specifically "take with a meal," and there's a reason for that, but they can't afford food and medicine, so they go out their food and end up back in the hospital. not only does this produce human misery, but it costs a a lot of money when people go to the emergency room, costs money when people have prolonged stays in the hospital. if you don't care about the moral as picket of this, you ought to care about the bottom line, you ought to join with me in this effort to, you know, to take op the issue of hunger in america.
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i asked the president, pushing him and pushing him to do a white house conference on food nutrition, to bring everybody together, you know, all the different governmental agencies to better coordinate with each other, not only to get people what they need in the short term, but to help transition people off of public assistance. you know, a big chopping of the people op snap, the new name for food stamps, work for a living. they work. people say, oh, they ought to get a job, they do, but they earn so little they qualify for public assistance. you know, we have to tackle the issue. bring them in the room. the faith based leaders, food bank, and, you know, the mayors, the governors, you know, the grocers, and anybody -- the farmers, anybody who might have a role in this, bring them all together, lock the door, and don't leave until you have a plan. we do not have a plan to end hunger. we have a map to do a lot of things in the country, but no
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map to end hunger. hillary clinton said it takes a village. she's right. i say it takes a plan as well as a village because if you don't have a plan, then we don't know what the hell we're doing. you nay do good stuff locally, but if it's not connected to something else, which is not connected to something else, it just doesn't work. enough of the band-aids, we can solve the problem. same with global hunger. i'll close with this. you know, i have always believed, you know, from my travels around the curled that people look up to us, not because of the size of our weapons arsenals or not because of the number of military bases that we have, but for what we stand for. they appreciate us being a beacon of freedom, democracy, and a stall wart of human rights. they put together the universal
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declaration of human rights. that's a great source of inspiration for people around the world, especially human right defenders. i believe, from my travels, that there's something else, and that is we're all alike. we're all the same. whether you're a mother or a father here in washington or massachusetts, or whether you're a mother, a father in kenya, ethiopia, latin america, we have one thing in common -- we all care about our kids, our families, our security, and i believe that even though we do great things, give hillary clinton and the director a lot of credit for their initiative on the feed the future plan they have to help promote agricultural sustainable growth for food security all over the world, an incredible thing, we have to invest much, much more in that. if we are known around the world as the, you know, leader in the effort to end extreme poverty
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and hunger, i think we would like us more, and i have this red call idea. people like you. they don't want to hurt you. one example. i'm the author of this program called the george mcgovern robert dole international school food program, incentives in it to help create, sustainable, self-sufficient school feeding programs in various parts of the world, millions of kids are fed in school because of this program, and millions would not otherwise go to school, but go because there's a meal there of the parents send them there. programs are innovative for a school meal, have class, bring home, you know, a little snack that oftentimes feeds your brother or sister or mother or your father. we visited the programs in an
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internally displaced person's community outside of bogota, colombia, and a mother came up to me to say thank the people of the united states for me. my son is 11 years old. she said, every day in this slum that we live in, one of the leaders from the armed groups comes through here, one day it's the fat guerrillas, next the right wing paramilitaries, and they approach me, this 11-year-old boy's mother, and they say, give me your son. give me your son. let him join us. we'll give him a gun, he'll fight for our cause. you know, let us join us, and in exchange, we'll promise you one thing, and that is that we'll feed him every day, something you can want do, and she says, i have come so close to giving up my 11-year-old son. i know if he joins with the groups he'll probably be killed,
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but i know without food, he will die here. she said, i don't have to make that choice anymore. i don't have to make that choice anymore. you, the people of the united states, have made it possible for my son, not only to be fed every day, but to be fed in a school setting where he learns to read, write, and get out of this terrible place, you know, and have a good life, and i'll never, ever, ever forget you about that. i told the messager, cable that back, cable that back. this is magic. this is what it's all about, and so, you know, one of the things that i feel very strongly about is that that's where our strength is, and those are the programs, those are the initiatives to push around the world, you know, no one -- i heifer in anyone say to me, you know, give me a rocket launcher or, you know, give me more guns or give me more, you know, land mines or whatever. people don't -- people ask for food. they ask for help with
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agriculture. you know, i mean, we're all alike in that respect. i also think, too, that this kind of tendency for us to believe that we have to have a military foot print every place in the world, i think, is counterproductive. how would you like it if in maryland there's a military base that china had or in virginia, russia had a base. you'd resent it. you'd resent it because it's your -- it's our country, not theirs, and i understand the importance of military arrangements between countries, but i will tell you our greatest strength is in our humanity, it is not, you know, in the number of military bases we have around the world or the size of our weapons arsenal, and so i hope we have these discussions in the remaining years of the obama administration. i hope that he can, you know, change, not only this country for the better in terms of ending poverty and ending hunger, but i hope he can help
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spearhead the effort to lift up people all around the world, and that's what roosevelt called on us to do, and the words she spoke are as true today as back then. that's where we need to go, and so i come before you as somebody who is excited about the future. i mean, i'm not happy with kind of the way things go in the immediate term, but i'm optimistic. i believe that some of the ideas, you know, caring about one another here at home and around the world, i think -- i think -- i think that's the future. the sooner we get there, the better, and so i thank you for who you are. i thank you for your activism. i thank you for taking politics seriously. i thank you for paying attention to what's going on in the world and not speaking just in terms of sound bites, but understanding, you know, what the issues are. they are complicated, but, you know, as troubled as congress is right now, you know, there's a
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time for everything. there's a time for this kind of, you know, back ward thinking house of representatives. that time is passing, and we will soon get to a point where we can get a congress that want to get things done and put the american people ahead of parties. thank you very much for having me. [applause] >> thank you so much for this wonderful, inspiring talk. we're going to fake questions from the floor, and the congressman will repeat some and respond to them. just keep them short, please. raise your hands. >> my name is nick, a veteran of world war ii, two d-days in
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africa and in italy. there was a fellow, george washington, who uttered three words with meaning, no foreign entanglements. now, this means, to me, that no american soldier should be on foreign soil fighting for that country's civil war or whatever their problem is. we should not have sent one solder to vietnam, not one. if we want to help an ally, do it militarily or financially. as far as i'm concerned, vietnam was a crime against humanity, iraq, afghanistan, and a few others. >> well, i mean, i -- i think you all heard the question? look, i agree with you. i think vietnam was a terrible mistake. i think the war in iraq was a fecial mistake. i think the war in afghanistan, which began as an effort to go after bin laden, now has morphed into this, you know, mission that nobody quite knows what the
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hell it is or how it ends. you know, i -- that is an example, i think, of mission creep. , afghanistan, it's also an example of getting involved in foreign entanglements, where, frankly, we can't untangle some of the issues that are, you know, unique to the internal workings of afghanistan. i would just say we have paid a heavy price for these wars in terms of blood and treasure. you know, we are nearly bankrupted because of the wars, and on top of all of that, you know, we have lost some of the best and brightest that our country has to offer. i've been to more funerals than i care to remember, just of these brave men and women who had families, bright futures, who lost their lives because of unjustified wars. i -- as soon as we get out of these wars, i think we need to be careful not to get sucked into another one, and there's people out there who are anxious to get involved in more wars.
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>> if you tried to close some of the bases in countries, don't you think the brass in the pentagon would be the first ones to scream about it? >> yeah, i mean, the question is if we close some of the bases overseas, i think the brass in the pentagon will scream about it? >> probably, probably. look, every agency, you know, has their defenders, and everybody wants to hold on to what they got and not give anything up. we ought to have a discussion in this country about what national security means. i mean, is dpsh do we all feel safer because of, you know, all the bases all over the world and feel safer because we blow up the world 30 times when you only can blow it up once. we ought to have a new definition of national security like making sure everybody in the country has enough to eat. food ought to be a right. people need good quality health
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care, have a job, live in safe communities, have access to a good education. those are the sources of our strengths, and, yet, when you listen to some of the debates in congress, you would think none of that matters, that it's all about flexing our military might. look, i want a military second to none, don't get me wrong, but i think the sources of our strengths, you know, are also in these other things, and we're neglecting them. we're not going to be an economic superpower if we don't invest in research, medical research, scientific research, you know, if we don't keep our infrastructure, you know, as modern as it can be. we're going to lose our economic edge. you know, i tell people that my constituents, you know, you know, they don't stay up at night saying, jesus, bin laden's brother going to come through the front door and attack me? what they worry about and lose sleep at night over is whether or not they have a job the next day, whether their kids have 5
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job when they get out of college, whether or not they will be able to afford their mortgage. i mean, those are the things that people are, you know, give people feelings of insecurity. we need a new definition. we need to get a debate going, a national debate where we can broaden that definition of national security. >> mr. mcgovern, first of all, i think you're to be commended for the stand that you took in the recent film, "a place at the table," and i can't remember if there there were any other congressmen who participated in that film, but you are to be commended for that, and my question is this, why, in congress, are there so many patriots who look down in contempt when they talk about food stamps? is it that they pander to the far right wing or so disconnected they don't care? >> i think it's both, quite
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frankly. i think they pander the right wing when they try to demonize a program that provides people protection, when they are vulnerable, can't afford food, and so that's one of the thing. the other thing, i think a lot of members of congress have no clue what it's like to be poor. you know, so the movie that the gentleman referenced is called, "a place at the table," a film about hunger in america, and hunger in america is not like hunger or starvation in africa. i mean, here it's different, but it's every bit as deadly, and it examines, you know, families who are struggling in poverty trying to put food on the table. i lived on a food stamp diet for a week with some of my colleagues a few weeks back because i think people thought that the food stamp benefit was, like, you know, as no , ma'amically high. there's a benefit. right now, it's $1.50 a meal. you can't get a coffee for a buck-50, and it's -- you know, we lived on a diet, kept the
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blog, and reminded people it's tough to be poor, hard work to be poor, to figure out how you put food on the tail for your family when you have a limited amount of money, so, you know, when you run out, you run out, and the terrible choices that people have to make, and so, look, you know, i think this food stamp program now called "snap," i think is -- it's a great program. it's a great program because if you didn't have it, then you would have people who were not hungry and starving to death, and part of the problem here in washington is it's become unfashionable to worry about poor people. it's easy to demonize them. the 0*er problem is, you know, you can vote against snap and vote to eliminate it all you want, and there's no political consequence. you know, you vote for gun control measure, and all the sudden the nra is on your back, but, you know, if you go to basically take a vote on poor people, you will not lose your
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election, and what -- i hope what the film does, "a place at the table," i hope is raises awareness to get people to look how members of congress vote on res of poverty and hunger, and if they vote the wrong way, they won't get a vote in the next election. there ought to be a political consequence to undermind programs of the circle of protection. >> oh, thank you so much. you really energized me to want to work on a war against hunger, and i'd like to ask you in terms of the wmdc what you might recommend in terms of where we can best put time and action to work against hunger? are there pieces of legislation that i don't know anything about, that we can start getting behind? what would you recommend to us? thank you. >> one is call your member of
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congress to get on the mcgovern bill in the house of representatives -- [inaudible conversations] >> what? [inaudible conversations] [laughter] >> but -- well -- the mcgovern bill to basically stop more cuts in the snap program. you know, one of the things that's really disheartening to me, notwithstanding the fraud and bias in the crop insurance program, really kind of a scan dan in and of itself, last year in the farm bill, the republicans in the house voted to cut $16.5 out of the snap program, and i was told i should be happy because they wanted to cut $30 billion from the program. we have a bill, i'm the author of it, it would say no more cuts in ?ap. that's number one. number two, you are probably involved with some of the local food banks, you know, and the initiatives here. i'm happy to work you and give
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you ideas of some other things you might want to do. the other thing is, you know, because puts pressure on the president, to do a conference, you know, let's solve this, we can have benchmarkses, and, you know, measure the progress. if we are, that's great. if we're not, we know who to blame. who's not doing their assignment? we need a plan. that's where i begin. >> i wonder if you comment on the question of integ integration, the impasse we're at dealing with the 9 million here illegally, and do you think it's possible the federal government could ever develop a serious, i mean, expanded guest worker program to make it possible for people to come and go here against the dilemmas they face? >> yes, i do. you know, i think tab we put our minds to it, we can develop, you
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know, a guest worker program that works, and in the meantime, we need a comprehensive immigration to do a number of things. one, we have to regularize the status of the millions of people who are here, and, by the way, who are working by and large, many who are washing dishes, at our restaurants, you know, who are doing seasonal work and all kinds of stuff, for whatever reason, we have a hard time, you know, finding nonimgrants to do. the other thing is that, you know, we are a nation of immigrants. one of the great thing about this country is diversity. we have to celebrate that. when i hear people talk against i'll gracious -- immigration we rorm, it's like we don't want any new people here. look, the more new people, the betterment i mean, what -- in my own city, i've just seen over the years these transformations, different immigrant groups came in, and it's enriched my life.
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learn about cultures, more kinds of food than i ever imagined, but i also, you know, people who come here have a great work ethic. we have to solve the problem. i'm hardened the news talks about the byproduct and consensus growing. republicans realize being against immigration is not in their political interest. that's a good thing. may help them work with us to come to a compromise, but we, you know, we need to deal with issues like border security, need to deal with issues of system work, and need to regularize statuses of people who are here, and i think we can do that. i think that can happen this year, and i guess if it happens, my guess it this year because in the election year, people get sillier than they do in not election years, so -- >> i'm pam bailly, a constituent, very happy to be. i went to stack -- pakistan in october to observe
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drone strikes. there's been a growing don't, growing question in congress and otherwise, but you talk about unintended consequences seems to be huge in terms of explaning why people don't admire or consider america exceptional. i don't know how many people are aware of the signature strikes we're striking not individuals, but patterns of suspicious 2*69 which i hear are men between the ages of 18-40 who live in the wrong place. what concerns me is drones make it possible -- i see it disturbing trend as we pull soldiers out, drone strikes did up because it saves our american lives, but it's not saving the other end, and we are removed from it. if we remove ourselves from the consequences, what do you think about it? >> i'm worried about that as well. yipe, you know, it seems like we are moving to a new level of basically going to war and killing people without, you know, having to kind of see it first hand or feel it: none of
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our soldiers are on the battlefield, yet, we have drone strikes that get the bad guy, but kill children or innocent people who have nothing to do with the bad guy. i'm worried about that trend. you know, i -- i think -- i think -- i don't agree with rand paul on much, but i'm glad he had a meltdown in the senate with a filibuster to call attention to the fact we don't have a policy. we don't know what the heck the policy is. there's no definition. we have drones today, the chinese have them tomorrow, and russians have -- so what are the rules of engagement here? one final thing, we're all god's children, here in the united states or in pakistan or afghanistan. we're all, you know, human life is as valuable to people there as it is to people here, and when innocent people, you know, get killed as a result of the strikes, you know, i mean, you know, the families of those people, they'll hate us until they die because we took away the most precious things in
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their lives, their kids or husband or their wife or mother or their father. you know, we need to have more discussion about how do we solve some of the problems without bombs, drones, and wars, and, look, i'm not naive, but, you know, i just came from this civil rights pill garage with congressman john lewis, great civil rights leader, took a group down to alabama, went to tusk loose is a, birmingham, selma, marched over the bridge where 48 years ago john lewis was beaten, almost killed for marching over the bridge, bun one of the things that was so inspirational to me is that that whole movement, that civil rights movemented in the country was nonviolence, you know, john lewis was hit over the head, you know, with a bat by an alabama policemen, but when he was well, he didn't go and hit the policeman. it was a nonviolence movement that changed this country for
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the better, and, quite frankly, is an inspiration for the rest of the world. their inspiration was ghandi, but nonviolence can be used in a way to change the world, and we are so fix sated with military answers to everything that we don't even talk about where the alternatives, you know, if you don't do this, we're going to bomb you or occupy you and if you don't to -- do this, we're going to do this. there's another part, and we ought to have more discussion about what are the -- what are the peaceful ways without killing everybody to solve the problem, and i know there are. there has to be. >> well -- [applause] >> i'm bill, and i work with a local dc democratic party here in the district of columbia, and i commend you for your work on hunger, which we know impa

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